What represents cash inflows associated with a capital investment decision?

The essence of capital investment decisions lies in understanding the cash flows that result from those investments. Cash inflows represent the money generated by the investment, which can include revenues from the sale of goods or services produced, cost savings realized through increased efficiencies, or other financial benefits directly attributable to the investment. When evaluating a capital investment, assessing these cash inflows is essential as they impact the overall return on investment and help determine the feasibility and potential profitability of the investment.

Cash outflows, while critical to consider, reflect the costs associated with acquiring or maintaining the investment, such as purchase price, installation costs, and ongoing operational expenses. Economic life pertains to the duration over which the investment is expected to generate cash flows and is a relevant factor but does not directly represent cash inflows. Opportunity cost of funds refers to the potential returns lost by investing in one option over another. While this is an important concept in capital budgeting, it is not a direct representation of cash inflows generated by an investment.

Thus, cash inflows are the primary focus when evaluating the potential benefits and effectiveness of a capital investment, making it the correct choice in this context.