Question

g Select one: a. Capital budgeting analysis for expansion and replacement projects is essentially the same because the types of cash flows involved are the same. b. The replacement decision involves an analysis of two independent projects where the relevant cash flows include the initial investment, additional depreciation, and the terminal value. c. The change in working capital for a project is the difference between the required increase in current assets and the spontaneous increase in current liabilities and is always positive. d. The supplemental operating cash flow for capital budgeting includes return on invested capital, which is net income, and return of part of invested capital, which is depreciation. e. When a firm implements a project which requires an increase in working capital, both the increase in current assets and current liabilities must be financed.

Answer 1

Answer:

The correct statement option is b.

Explanation:

The replacement decision involves an analysis of two independent projects where cash flows include the initial investment, additional depreciation and the terminal value.

The replacement decision is the process of identifying, evaluating and taking decisions on two or more independent alternatives. During this process company evaluate various alternatives of investment in different projects and select one of the best alternative based on its cost, rate of return, time required and risk associated with it etc.