In regard to capital budgeting, why do we tend to focus on cash flows rather than net income? 2. Explain the difference between accounting income and cash flow. 3. In
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Instructions
After reviewing this week’s assigned reading, answer the following questions. Be sure to write clearly, using complete sentences. Enter answers as this template.
1. In regard to capital budgeting, why do we tend to focus on cash flows rather than net income?
2. Explain the difference between accounting income and cash flow.
3. In a capital budgeting analysis, explain why opportunity costs and external factors are included in the analysis but sunk costs are not.
4. In a capital budgeting analysis, why are interest charges not deducted when a project’s cash flows are calculated?
5. Is it worth the effort to estimate daily project cash flows? Would doing so be helpful in the investment analysis? How would the results be negatively or positively affected?
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