Predicting the cost inflows and outflows for a project. Please discuss what factors influence the cost inflows and outflows of a project and include how time impacts the calculation. Please also respond to another students post with your perspective on their view.

REALITY BYTES Developing proficiency with present value mathematics is usually the most difficult aspect of capital budgeting for students taking their first managerial accounting course. In real-world companies, the most dif- ficult aspect of capital budgeting is forecasting cash flows for several years into the future. Consider the following capital budgeting project: In 1965, representatives from the Georgia Power Company vis- ted Ms. Taylor's fifth-grade class to tell her students about the Edwin 1 Hatch Nuclear Plant that was going to be built nearby. One of the authors of this text was a student in that class. In 1966, construction began on the first unit of the plant, and the plant started producing electricity in 1975. The next year, 10 years after hearing the presentation in his fifth-grade class, the author worked on construction of the second unit of the plant during the summer before his senior year of college. This second unit began operations in 1978. Planning for Capital Investments In its 2019 annual report, the Southern Company, which is now the major owner of the plant, stated that the Hatch plant is expected to operate until 2038 and that decommissioning of the plant will continue until 2075. The cost to construct both units of the plant was $934 million. The estimated cost to dismantle and decommission the plant is over $960 million. It seems safe to assume that the students in Ms. Taylor's fifth-grade class were not among the first to hear about the power company's plans for the Hatch plant. Thus, we can reasonably conclude that the life of this capital project will be over 100 years, from around 1960 until 2075. Try to imagine that you were assigned the task of predicting the cost inflows and outflows for a project that was expected to last 100 years. Clearly, mastering present value mathematics would not be your biggest worry. Kristin Smith Shutterstock 463 are expected. For your convenience, we have labeled the net cash flows in the spreadsheet. Labeling is not necessary to execute the IRR function. The entire function, including values. and guess, can be entered into a single cell of the spreadsheet. Persons familiar with spread- sheet programs learn to significantly simplify the input required. The IRR results in Exhibit 10.6 confirm the ranking determined using the present value index. Alternative I (modernize maintenance facility), with an internal rate of return of 18.69 percent, ranks above Alternative 2 (purchase a truck) with an internal rate of return of 17.61 percent, even though Alternative 2 has a higher net present value (see Exhibit 10.5). Alternative 2, however, still may be the better investment option, depending on the amount available to invest. Suppose Torres has $120,000 of available funds to invest. Because Alter- native 1 requires an initial investment of only $78,000, $42,000 ($120,000 - $78,000) of capital will not be invested. If Torres has no other investment opportunities for this $42,000, the company would be better off investing the entire $120,000 in Alternative 2 ($115,000 cost of truck + $5,000 working capital increase). Earning 17.61 percent on a $120,000 investment is better than earning 18.69 percent on a $78,000 investment with no return on the remaining $42,000. Management accounting requires exercising judgment when making decisions