Answered: Discuss the following statement. A…

Discuss the following statement. A manager believes that changes in NWC can be ignored from your free cash flow calculation if it will be recovered at the end of the project.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 20E

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Concept explainers

Contract Costing

Contract costing is about tracing particular costs related to a particular contract entered into with the customer. It is one of the forms of job order costing. It is useful in long-term contracts at the most. It is seen that substantial time is required for the completion of the contract which takes different accounting periods. Thus, it is very much helpful for recognizing the costs associated with it and accounting in their specific accounting periods.

Question

Discuss the following statement. A manager believes that changes in NWC can be ignored from your free cash flow calculation if it will be recovered at the end of the project.

Definition Definition Cash that is left over after a company has paid for its operating and capital expenses. Unlike net income or earnings, free cash flow excludes non-cash expenses of the income statement and includes the expenditures on equipment and assets. Free cash flow also helps potential shareholders to evaluate how quickly the company can pay interest and dividends.

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The payback criterion has problem(s) like Select one: O A. It considers the time value of money O B. It ignores the cash outflows or inflows after the payback period and the time value of money O C. It considers the inflows and outflows after the Payback Period O D. It considers all the cash outflows or inflows of the project
One of the benefit of the pay back period is that it focuses on the timing of the project`s benefits and costs, even though it does not adjust the cash flows for the time value of money Select one: True False
The internal rate of return is the: discount rate that makes present value of cash inflows equal to present value of cash outflows. discount rate that causes a project's after-tax income to equal zero. discount rate that results in a zero net accounting return. rate of return required by the project's investors.
Which of the following is not a recommended solution if the comparison of projected cash flows with goals identifies a shortfall? a. Find additional income. b. Utilize the emergency fund. c. Cut back costs. d. Change goals. e. All of the above are recommended solutions.
1. Kindly break down how you got terminal cashflow at the end of the project. 2. Explain how you arrived at Net Present Value. What is the formula used?
A project can have as many different internal rates of return as it has: changes in the sign of the cash flows. cash inflows. cash outflows. periods of cash flow.
Payback period is the time in which the initial cost of an investment is expected to be recovered through the cash inflows generated by the investment. Briefly discuss the pros and cons of payback period?
Which of the following statements is correct regarding the payback method? Takes account of differences in size among projects. If a project’s payback is positive, then the project should be accepted because it must have a zero NPV. Ignores cash flows beyond the payback period. Has an objective, market-determined benchmark for making decisions. Directly account for the time value of money.
The best model to analyze the project financially is cash flow. Select one: O True O False
To calculate net present value of a project with normal cash flows, find the present value of the expected cash flows, and subtract A) retained earnings. B) the cost of the investment. C) the factor loading. D) the payback period.
Is it worth the effort to estimate daily project cash flows? Would doing so be helpful in the investment analysis? How would the results be negatively or positively affected?
Is it always necessary to adjust projects’ cash flows when different projects haveunequal lives? Explain.