When Evaluating the Cash Flows Associated with a Capital Budgeting

Multiple Choice

When evaluating the cash flows associated with a capital budgeting project, the shipping and installation costs associated with the purchase of an asset are included in the computation of the:

A) initial investment outlay, because these expenses are part of the project's depreciable basis.
B) incremental operating cash flows, because shipping and installation costs represent expenses that must be written off annually over the life of the project.
C) terminal cash flows, because these expenses are not paid until the end of the project's life.
D) sunk costs, because these expenses do not affect any cash flows associated with purchasing the project.
E) project's opportunity cost, because these costs increase the potential of the project.