1. All projects (or businesses) go through three stages acquisition, operating, and disposition. Using Chipotle Mexican Grill as an example (ticker symbol CMG) please indicate what you believe to be the most important estimate, number, or variable in estimating the cash flows of each stage of the opening, operating and disposition of a new restaurant. Put another way -- what do you believe is the most important estimate for Chipotle before opening the store, while operating the store, and indisposition of a store?

2. The business press is filled with examples of mistakes made by businesses related to estimating the cash flows related to capital budgeting projects. For example, Tesla "squeezing" its suppliers for discounts and/or delays in payment could be an example of a failure to estimate the working capital needed to ramp up production of its new car line. The chapter mentions several areas where businesses need to be careful. Some of these areas are; to use incremental rather than average cash flows, forgetting to include incidental effects or embedded growth options, forgetting opportunity cost related to the cost of the project, inappropriately including the sunk cost in the analysis, using an incorrect overhead allocation, not including the salvage or residual value in the cash flows. Either state a real-life example of one of these that has played out in the press or describe in detail an example of where you might see this.

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Stages in the Project Live Cycle In capital budgeting decisions it is critical to know how much the business is keen to invest and bring in cash for the project Chipotle will need to appraise the cost ... View the full answer