Which of the Following Is Not Considered a Relevant Concern

question 31

Multiple Choice

Which of the following is not considered a relevant concern in deter- mining incremental cash flows for a new product?

• A) The use of factory floor space which is currently unused but available for production of any product.
• B) Revenues from the existing product that would be lost as a result of some customers switching to the new product.
• C) Shipping and installation costs associated with preparing the machine to be used to produce the new product.
• D) The cost of a product analysis completed in the previous tax year and specific to the new product.
• E) None of the above. (All are relevant concerns in estimating relevant cash flows attributable to a new-product project.)

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Definitions:

Compounded Annually

Interest calculation method where interest is added to the principal at the end of each 12-month period.

Annual Rate of Decline

The percentage at which a value decreases over the course of one year.

Strip Bond

A debt security that has had its principal and coupon payments detached and sold separately as zero-coupon bonds.

Compounded Semi-Annually

Interest that is computed and added to the original amount every six months, resulting in compound interest.