Question: a. In capital budgeting analysis, why do we focus on cash flow rather than accounting profit? [2] b. Should the costs of evaluating a project

a. In capital budgeting analysis, why do we focus on cash flow rather than accounting profit? [2]

b. Should the costs of evaluating a project be included as a portion of the projects cost? [2]

c. Is the ability to use money allocated to a project for another purpose an example of a sunk cost? [2]

d. Explain how depreciation creates a cash inflow even though there is no cash inflow or outflow associated with the depreciation deductions themselves. [2]

e. Is a negative change in net working capital a problem (assuming profitability and sales are maintained)? [2]

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