Select the statement that is most correct. Since depreciation is a non - cash expense, the firm
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Select the statement that is most correct. Since depreciation is a noncash expense, the firm does not need to know the rate of depreciation when calculating operating cash flows. Monte Carlo simulation can provide valuable information about the risk of a project's cash flow such as the standard deviation of the cash flow but it cannot tell us anything about the expected cash flow. The ability to abandon a project if cash flows are lower than expected can have value irrespective of whether the project is of higher or lower than average risk. Proper analysis of project's cash flows to determine its NPV requires that those cash flows include both opportunity costs and sunk costs. Changes in net operating working capital can be excluded from a project's cash flows because the funds will be recaptured at the conclusion of the project
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