When Evaluating a New Project, Firms Should Include in the Projected

question 48

Multiple Choice

When evaluating a new project, firms should include in the projected cash flows all of the following EXCEPT:

• A) Previous expenditures associated with a market test to determine the feasibility of the project, provided those costs have been expensed for tax purposes.
• B) The value of a building owned by the firm that will be used for this project.
• C) A decline in the sales of an existing product, provided that decline is directly attributable to this project.
• D) The salvage value of assets used for the project that will be recovered at the end of the project's life.
• E) Changes in net working capital attributable to the project.

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Definitions:

Indifference Curve

A graph depicting combinations of goods that give the consumer equal satisfaction and utility.

Cookies

A small, sweet baked treat that comes in various flavors and can include ingredients like chocolate chips, nuts, or dried fruit.

Brownies

A type of chocolate baked treat, typically in the form of a square or rectangular cake slice.

Normal Good

A good for which demand increases as the income of consumers increases.