116) The very last step in the final stage in the capital budgeting process is to make the investment
117) Relevant cash flows are expected future cash flows that differ among the alternative uses of
118) In calculating the net initial investment cash flows for capital budgeting analysis any increase in
working capital required for the project should be included.
119) A capital budgeting project is accepted if the required rate-of-return equals or exceeds the internal
120) The net present value method calculates the expected monetary gain or loss from a project by
discounting all expected future cash inflows and outflows to the present point in time using the
121) The tendency to be influenced by sunk costs and to continue to pour money into unviable projects
is a common psychological phenomenon which is called ESCALATION OF COMMITMENT.
122) There is an inconsistency in using the net present value method as best for capital budgeting
decisions and then using a different method to evaluate performance.
123) The net present value method can be used in situations where the required rate-of-return varies
over the life of the project.
124) The use of an accelerated method of depreciation for tax purposes would usually increase the
present value of the investment.
125) A capital budget spans only a one-year period. 125)