ECN 104 Study Guide - Net Income, Fixed Asset, Techron

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Lo1 how to determine relevant cash flows for a proposed project. Lo2 how to project cash flows and determine if a project is acceptable. Lo3 how to calculate operating cash flow using alternative methods. Lo4 how to calculate the present value of a tax shield on cca. Lo7 how to evaluate the equivalent annual cost of a project. Lo8 how to set a bid price for a project. Answers to concepts review and critical thinking questions. 1. (lo1) an opportunity cost is the most valuable alternative that is foregone if a particular project is undertaken. The relevant opportunity cost is what the asset or input is actually worth today, not, for example, what it cost to acquire. 7. (lo1) it"s probably only a mild over-simplification. The cash portion of current assets will be retrieved. Some receivables won"t be collected, and some inventory will not be sold, of course.