FINANCIAL ACCOUNTING 

1. In the context of capital budgeting, what is an opportunity cost?2. Given the choice, would a firm prefer to use MACRS depreciation or straight-line depreciation? Why?3. In our capital budgeting examples, we assumed that a firm would recover all of the working capital it invested in a project. Is this a reasonable assumption? When might it not be valid?4. Suppose a financial manager is quoted as saying, “Our firm uses the stand-alone principle. Because we treat projects like minifirms in our evaluation process, we include financing costs because they are relevant atthe firm level.” Critically evaluate this statement.

Testimonials

FINANCIAL ACCOUNTING 1. In the context of capital budgeting, what is an opportunity cost? 2. Given the choice, would a firm prefer to use MACRS depreciation or straight-line depreciation? Why? 3. In