Which of the Following Statements Is CORRECT

question 61

Multiple Choice

Which of the following statements is CORRECT?

• A) In a capital budgeting analysis where part of the funds used to finance the project would be raised as debt, failure to include interest expense as a cost when determining the project's cash flows will lead to an upward bias in the NPV.
• B) In a capital budgeting analysis where part of the funds used to finance the project would be raised as debt, failure to include interest expense as a cost when determining the project's cash flows will lead to a downward bias in the NPV.
• C) The existence of any type of "externality" will reduce the calculated NPV versus the NPV that would exist without the externality.
• D) If one of the assets to be used by a potential project is already owned by the firm, and if that asset could be sold or leased to another firm if the new project were not undertaken, then the net after-tax proceeds that could be obtained should be charged as a cost to the project under consideration.
• E) If one of the assets to be used by a potential project is already owned by the firm but is not being used, then any costs associated with that asset is a sunk cost and should be ignored.

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Definitions:

Strategic Direction

The long-term path or course of action that an organization intends to follow to achieve its goals and objectives.

Multiproduct Firm

A company that markets and sells multiple product lines under one umbrella, often in related fields.

Customer Value

The valuation of a product or service by a consumer against its alternatives.

Strategic Marketing Process

A deliberate approach aimed at creating and implementing effective marketing strategies that align with a company’s overall goals and drive competitive advantage.