A Company Is Considering a Proposed New Plant That Would

question 9

Multiple Choice

A company is considering a proposed new plant that would increase productive capacity. Which of the following statements is CORRECT?

• A) In calculating the project's operating cash flows, the firm should not deduct financing costs such as interest expense, because financing costs are accounted for by discounting at the WACC. If interest were deducted when estimating cash flows, this would, in effect, "double count" it.
• B) Since depreciation is a non-cash expense, the firm does not need to deal with depreciation when calculating the operating cash flows.
• C) When estimating the project's operating cash flows, it is important to include both opportunity costs and sunk costs, but the firm should ignore the cash flow effects of externalities since they are accounted for in the discounting process.
• D) Capital budgeting decisions should be based on before-tax cash flows.
• E) The WACC used to discount cash flows in a capital budgeting analysis should be calculated on a before-tax basis.

Calculate partnership return on equity and individual partner return on equity ratios.

Understand the liquidation process and final distribution in partnerships.

Understand the basics of modifying images in presentations.

Recognize the importance of saving work before printing or presenting.

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Definitions:

Pension Coverage

Refers to the extent to which employees are provided with pension plans by their employer, which are designed to support financial security in retirement.

Older Workers

Individuals in the workforce who are near or beyond the typical age of retirement, often facing unique challenges and opportunities.

Inclusive Environment

A work or social setting that values diversity and incorporates practices to ensure all individuals feel respected, valued, and able to fully participate.

People Analytics

The practice of using data about human behavior, relationships, and traits to make business decisions.