Question

Which of the following statements is​ FALSE? A. Only include as incremental expenses in your capital budgeting analysis the additional overhead expenses that arise because of the decision to take on the project. B. Many projects use a resource that the company already owns. C. As a practical​ matter, to derive the forecasted cash flows of a​ project, financial managers often begin by forecasting earnings. D. When evaluating a capital budgeting​ decision, we generally include interest expense.

Answer 1

The statement that is false here is D) .

Step-by-step explanation:

Capital budgeting is a process which is used by many organizations for evaluating their projects and investments. In this a project's cash inflow and outflow are analyzed to determine whether return that is expected to be earned on project is more than set benchmark or not.

During this process , only operating expenses are taken in to consideration , not the interest expenses because interest expenses are covered by the cost of capital, for the purpose of discounting future cash flow.