Which of the Following Should Be Considered When a Company

question 46

Multiple Choice

Which of the following should be considered when a company estimates the cash flows used to analyze a proposed project?

• A) The new project is expected to reduce sales of one of the company's existing products by 5%.
• B) Since the firm's director of capital budgeting spent some of her time last year to evaluate the new project, a portion of her salary for that year should be charged to the project's initial cost.
• C) The company has spent and expensed $1 million on R&D associated with the new project.
• D) The company spent and expensed $10 million on a marketing study before its current analysis regarding whether to accept or reject the project.
• E) The firm would borrow all the money used to finance the new project, and the interest on this debt would be $1.5 million per year.

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Definitions:

Time Constraints

The limitations on the amount of time available to complete a task or project.

Budget Constraints

Financial limitations that restrict the amount of money available for spending and investment.

Product Launch

The introduction of a new product to the market, involving activities designed to promote and sell the product.

Product Development

The process of creating or improving a product or service to meet market demands or take advantage of new opportunities.