Important points to remember while estimating the cash flows of a project are:
I.Only cash flow is relevant.
II.Always estimate cash flows on an incremental basis.
III.Be consistent in the treatment of inflation.
A)I only
B)I and II only
C)II and III only
D)I,II,and III

Question

Quizplus · Accepted Answer

All three points are important to remember while estimating the cash flows of a project. Only cash flow is relevant because it represents the actual money moving in and out of the project. Estimating cash flows on an incremental basis provides for a more accurate calculation of the project's profitability. Being consistent in the treatment of inflation ensures that the calculation of cash flows is comparable over time.

Important Points to Remember While Estimating the Cash Flows of a Project