Relevant Cash Flows
Write a page paper describing how to identify relevant cash flows used in evaluating a capital budget project.
Ensure the following points are addressed.
Why capital budgeting techniques use cash flows instead of profits.
Use the example of a restaurant chain opening an additional location for your examples in topics below.
Define and provide an example of an incremental cash flow of opening an additional restaurant.
Define and provide an example of a sunk cost of opening an additional restaurant.
Define and provide an example of an opportunity cost of opening the additional restaurant.
Define and explain how several types of initial investment costs should be estimated for the new restaurant.
Define and explain how net operating cash flows should be estimated for the new restaurant.
Define and explain how terminal cash flows should be estimated for the new restaurant.
