When projecting future cash flows of an investment ________.
A) cash flows include depreciation
B) cash inflows and outflows are treated separately, rather than being netted together
C) cash flows are projected by accounting personnel without considering input from other departments
D) the initial investment is a significant cash outflow that is treated separately from all other cash flows

Question

Quizplus · Accepted Answer

The initial investment is a significant cash outflow that is treated separately from all other cash flows. This is because it represents a one-time payment and should not be included in the regular cash inflows and outflows of the investment. Depreciation is not included in cash flows, as it is a non-cash expense. Cash inflows and outflows should be netted together to determine the overall cash flow of the investment. All relevant departments should provide input in projecting future cash flows, not just accounting personnel.

When Projecting Future Cash Flows of an Investment ________