Capital Budgeting

Question 1

Decisions are based on

Answer 1

Pure hard cash flows

Question 2

The … is of utmost importance

Answer 2

Timing

Question 3

Cash flows are based on

Answer 3

Opportunity costs

Question 4

Financing costs are ignored. They are reflected in the

Answer 4

Required rate of return

Question 5

Sunk cost

Answer 5

An expense which already incurred and which shouldn’t impact today’s investment decisions

Question 6

Opportunity cost

Answer 6

What a resource is worth in its next best use

Question 7

Incremental cash flow

Answer 7

Cf is realized thanks to a decision. Is CF with a decision - the cf without that same decision.

Question 8

Conventional cash flow pattern

Answer 8

Initial outflow followed by several positive only cash flows

Question 9

Non-conventional cash flow pattern

Answer 9

Initial outflow is not necessarily followed by positive only cash flows