Which one of the following statements is correct?

Question

Quizplus · Accepted Answer

A project can create a positive cash flow from operations without affecting the sales level of a firm, for example, by reducing costs or increasing efficiency. Option A is incorrect because project analysis should include all cash flows that affect the statement of financial position as well as the statement of comprehensive income. Option C is incorrect because net working capital may also be required during the project, not just at the end. Option D is not always true, as interest expenses may not be applicable in certain situations, such as when analyzing all-equity financed projects. Option E is also incorrect because the opportunity cost of an asset, such as a company-owned building, is a cost, not a cash inflow, and should be included as an expense in project analysis.

Which One of the Following Statements Is Correct