When Evaluating a New Project, the Firm Should Consider All

question 21

Multiple Choice

When evaluating a new project, the firm should consider all of the following factors except:

• A) Changes in working capital attributable to the project.
• B) Previous expenditures associated with a market test to determine the feasibility of the project, if the expenditures have been expensed for tax purposes.
• C) The current market value of any equipment to be replaced.
• D) The resulting difference in depreciation expense if the project involves replacement.
• E) All of the statements above should be considered.

---

Definitions:

Probability of Success

The likelihood of a particular outcome deemed favorable or meeting a set goal.

Probability of Failure

The likelihood or risk that a system, component, or process will fail to perform within an expected timeframe.

Payoff Matrix

A table that shows the potential outcomes or payoffs of different strategies in a game or competitive situation.

Christmas Gifts

Items purchased or made to be given to others during the Christmas holiday as a gesture of goodwill and celebration.