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:

Impair

To weaken or damage someone's abilities or functionality in a certain area, such as impairing one's judgment or physical capacities.

Improve

Refers to the act of making something better or enhancing its value, quality, or effectiveness.

Evaluation Apprehension

Anxiety stemming from the possibility of being judged or evaluated by others.

Arousal

A physiological and psychological state of being awake or reactive to stimuli, often associated with increased heart rate and alertness.