Chapter 3

Question 1

sunk costs =

Answer 1

money spend which can not be used again

Question 2

Incidental costs =

Answer 2

necessary costs which often are small but unexpected

Question 3

Factors for quality of information

Answer 3

• Relevance
• Completeness
• Consistency
• Accuracy
• Reliability
• Timeliness
• Low-cost of collection compare with benefit to be gained by gathering

Question 4

What is working capital?

Answer 4

the additional cost nedded when investing in a new project. Example:
- More cash floats
- Larger/smaller stock
- Debitors
- Creditors
Cash flows are adjusted

Question 5

Net operating cash flow

Answer 5

Net operating cash flow = Profit before depreciation - Periodic investment (change) in net working capital

Question 6

What is incremental cash flows?

Answer 6

Incremental cash flow = Cash flow for firm with the project - cash flow for firm without the project.

Cash flow as a conseqvence of the investment