CFO of Cicero Industries Plans to Calculate a New Project's

question 30

Multiple Choice

CFO of Cicero Industries plans to calculate a new project's NPV by estimating the relevant cash flows for each year of the project's life (i.e., the initial investment cost, the annual operating cash flows, and the terminal cash flow) , then discounting those cash flows at the company's overall WACC Which one of the following factors should the CFO be sure to INCLUDE in the cash flows when estimating the relevant cash flows?

• A) All interest expenses on debt used to help finance the project.
• B) The investment in working capital required to operate the project, even if that investment will be recovered at the end of the project's life.
• C) Sunk costs that have been incurred relating to the project, but only if those costs were incurred prior to the current year.
• D) Effects of the project on other divisions of the firm, but only if those effects lower the project's own direct cash flows.
• E) All sunk costs that have been incurred relating to the project.

---

Definitions:

Arrange Tab

A feature in software applications, particularly in graphical or document editing programs, for organizing and aligning elements.

Tabular

Pertains to data or information presented in rows and columns, resembling a table.

Form Layout

The structure and arrangement of elements within a user form, influencing usability and aesthetics.

Subform

A form embedded within another form in database applications, often used to show related or detailed data.