Which of the following statements about project life in capital budgeting analys

Question

Which of the following statements about project life in capital budgeting analyses is most correct?

A. In all analyses, project life should reflect the best estimate of the project's actual life.

B. So that sufficient cash flows are included in the analysis, it is best to add two years to the actual expected life.

C. So that the project is not overvalued, it is best to subtract two years from the actual expected life.

D. If the analysis extends over the project's expected life, a salvage value cash flow is added to the time line.

E. If truncation of cash flows occurs, it is best to ignore the flows that occur beyond the truncation point.

Explanation / Answer

Which of the following statements about project life in capital budgeting analyses is most correct?

A. In all analyses, project life should reflect the best estimate of the project's actual life.

Note : Always Best estimate of Budget is that it meets actual , As Budget is standard which is being prepared on the analysis that the estimate would be near to actual to and therefore we analyse if there is variance from actual at later on , what was the reason for variance , So best estimate of budget is that Actual result should match budgeted analysis

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