All of the following are anticipated effects of a proposed project. Which of these should be considered when calculating the cash flow for the final year of a project?Group of answer choicesnet working capital recovery and operating cash flowsalvage values and net working capital recoveryoperating cash flow, net working capital recovery, salvage valuesoperating cash flow onlyoperating cash flow and salvage values

Which of the following may not generally result in underestimation of project cash flows?(1 Point)Under estimation of project cost of capitalUnder estimation of salvage valuesIgnoring intangible benefitsOverlooking the value of future options

Answer each part separately. a) To finance a certain project, a company must borrow funds at 10 percent interest. How should it treat interest payments when it analyzes the project’s cash flows? Explain. b) What are the tax consequences of selling an investment asset for more than its book value? Does this have an effect on project cash flows? What is the effect if the asset is sold for less than its book value? Explain. c) Why must incremental after-tax cash flows rather than total cash flows be evaluated in project analysis? Explain. d) Differentiate between sunk costs and opportunity costs. Which of these costs should be included in incremental cash flows, and which should be excluded? Explain. e) Why is it important to consider cannibalization in situations where a company is considering adding substitute products to its main product line? Explain.

Which of the following will increase cash flow?Working capital requirements decreaseEstimate of salvage value increasesDepreciation expenses increaseNone of the aboveAll of the above

Case StudyThe expected cash flows of three projects are given below. The cost of capital is 10 per cent. (Amount in INR.)Period   Project A Project B   Project C 0 ( 5000) ( 5000) ( 5000)1 900 700 2,0002 900 800 2,0003 900 900 2,0004 900 1000 1,0005 900 1100  6 900 1200  7 900 1300  8 900 1400  9 900 1500  10 900 1600  * CALCULATE the payback period, net present value, internal rate of return and accounting rate of return of each project.*IDENTIFY the rankings of the projects by each of the four methods. Based on the calculations, choose the correct answers of  the below mentioned questions.

You are a financial analyst for the Hittle Company. The director of capital budgeting has asked you to analyze two proposed capital investments, Projects X and Y. Each project has a cost of $10,000, and the cost of capital for each project is 12 percent. The projects" expected net cash flows are as follows:Expected Net Cash FlowsYear Project X Project Y0 ($10,000) ($10,000)1 6,500 3,5002 3,000 3,5003 3,000 3,5004 1,000 3,500Calculate each project's payback period, net present value (NPV), internal rate of return (IRR), and modified internal rate of return (MIRR).Which project or projects should be accepted if they are independent?Which project should be accepted if they are mutually exclusive?How might a change in the cost of capital produce a conflict between the NPV and IRR rankings of these two projects? Would this conflict exist if r were 5%? (Hint: Plot the NPV profiles.) Why does the conflict exist?