Estimating project cash flows is generally the most important, but also the most difficult, step in the capital budgeting process.Methodology, such as the use of NPV versus IRR, is important, but less so than obtaining a reasonably accurate estimate of projects' cash flows.

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Estimating project cash flows is crucial in making sound capital budgeting decisions, and while different methodologies can be used (such as NPV or IRR), the accuracy of the estimated cash flows is more important.

Estimating Project Cash Flows Is Generally the Most Important, but Also