Capital Budgeting

CFA Level I
#1

With regard to capital budgeting, an appropriate estimate of the incremental cash flows from a project is least likely to include a) externalities b) interest costs c) opportunity costs d) additional inventory

#2

B

#3

pepp Wrote: ------------------------------------------------------- > With regard to capital budgeting, an appropriate > estimate of the incremental cash flows from a > project is least likely to include > > a) externalities > b) interest costs > c) opportunity costs > d) additional inventory B interest costs are a financing event – the cost of capital includes cost (f) , so dont double count it

#4

D

#5

Oops.

#6

Guys, Bear in mind CAPEX

#7

It is B, trust me.

#8

add inv = working capital, that directly affects incremental cash flows, that is why it is NOT D

#9

I know it is B…this is why I said bear in mind CAPEX

#10

CAPEX?

#11

beingthatguy Wrote: ------------------------------------------------------- > CAPEX? http://www.investopedia.com/terms/c/capitalexpenditure.asp

#12

Cap X = reduces FCF and you’ll see the number on the CFI section of the SCF

#13

yup interest cost shouldnt be included coz its taken care of in kd-cost of debt