How should managers deal with subjective cash flow estimates (e.g. claiming positive cash flows for improved customer satisfaction related to better product quality)?
A)Cash flows that cannot be verified should be excluded.
B)A range of estimates should be considered, and the estimate that best justifies the project should be selected.
C)A range of estimates should be considered, and the lowest end of the range should be selected.
D)Subjective estimates should be included only if they are directly related to the project and are reasonable and conservative.
E)Only subjective estimates relating to product quality should be considered.

Question

Quizplus · Accepted Answer

Subjective estimates can be valid and useful, but managers must use judgment in their evaluation. The best approach is to include only those estimates that are directly related to the project and are both reasonable and conservative. By selecting this approach, the manager avoids any exaggerated or unreliable estimates of cash flow improvement resulting from better product quality.

How Should Managers Deal with Subjective Cash Flow Estimates (E