Which of the following factors should be included in the cash flows used to estimate a project's NPV?
A) Interest on funds borrowed to help finance the project.
B) The end-of-project recovery of any working capital required to operate the project.
C) Cannibalization effects, but only if those effects increase the project's projected cash flows.
D) Expenditures to date on research and development related to the project, provided those costs have already been expensed for tax purposes.
E) All costs associated with the project that have been incurred prior to the time the analysis is being conducted.

Question

Quizplus · Accepted Answer

The end-of-project recovery of any working capital required to operate the project should be included in the cash flows used to estimate a project's NPV. This is because working capital is typically invested to cover upfront costs and ongoing expenses, and at the end of a project, any remaining working capital should be returned to the company. Interest on funds borrowed, cannibalization effects, expenditures on research and development, and costs incurred prior to the analysis being conducted are all factors that may or may not be relevant to a project's cash flows, depending on the specific circumstances.

Which of the Following Factors Should Be Included in the Cash