Question

true or false : During capital budgeting when cash flows for a project are estimated, dividend and interest payments should be added back to calculate cash flows in the analysis.

Answer 1

During capital budgeting when cash flows for a project are estimated, dividend and interest payments should be added back to calculate cash flows in the analysis True.

The statement concerning capital budgeting that follows is false.

Sunk expenses are excluded.

What does the projected cash flow for capital budgeting include?

Included in this are the project's initial cash outlays, annual operating cash flows throughout its lifespan, and the asset's remaining cash worth at its conclusion.

When estimating cash flows for capital budgeting, how?

Operating income before depreciation less taxes, with the working capital changes taken into account, is the computation. OCF (operating cash flow) is calculated as operating income (revenue minus cost of sales) plus depreciation, taxes, and any changes in working capital.

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