Question

The economic feasibility of a project relies on the identification of its:

I. likely benefits, its expected costs and every cash flow related to the project

II. likely costs and benefits and its expected economic life

III. likely costs and benefits, opportunity costs and irrelevant cash flows

IV. the appropriate inflation and discount rates for the project

V. likely costs, expected depreciation and material sunk cash flows

Select one:

a. III and IV

b. I and III

c. II and IV

d. II and V

e. II and III

Answer 1

c. II and IV

Only the relevant cash flows should be considered, not the irrelevant cash flows. Sunk costs should not be considered.