Which of the following expenses should be included when estimating cash flows for investment projects?
A) Interest expense related to financing a project
B) Sunk costs
C) Required principal payments related to financing a project
D) Opportunity costs

Question

Quizplus · Accepted Answer

Opportunity costs should be included when estimating cash flows for investment projects because they represent the benefits foregone from not pursuing the next best alternative. Interest and principal payments related to financing are not included in cash flow estimations for project evaluation because they are financing flows, not operating flows. Sunk costs are past costs and should not be considered in the analysis of a new project.

Which of the Following Expenses Should Be Included When Estimating