Which One of the Following Would NOT Result in Incremental

question 52

Multiple Choice

Which one of the following would NOT result in incremental cash flows and thus should NOT be included in the capital budgeting analysis for a new product?

• A) Using some of the firm's high-quality factory floor space that is currently unused to produce the proposed new product.This space could be used for other products if it is not used for the project under consideration.
• B) Revenues from an existing product would be lost as a result of customers switching to the new product.
• C) Shipping and installation costs associated with a machine that would be used to produce the new product.
• D) The cost of a study relating to the market for the new product that was completed last year.The results of this research were positive,and they led to the tentative decision to go ahead with the new product.The cost of the research was incurred and expensed for tax purposes last year.
• E) It is learned that land the company owns and would use for the new project,if it is accepted,could be sold to another firm.

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Definitions:

Competitive Equilibrium

A market state where supply meets demand, leading to an optimized distribution of goods and services among competing actors.

Excess Demand

A situation in which the quantity demanded of a good exceeds the quantity supplied at a given price, often leading to upward pressure on prices.

Competitive Pure Exchange Economy

An economic model where agents trade existing goods without the production of new goods, guided purely by their own self-interest to find an equilibrium.

Contract Curve

In economics, a curve that shows the efficient allocations of goods or services that benefit two parties in an exchange, assuming no externalities.