Which of the Following Should Be Considered When a Company

question 64

Multiple Choice

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

• A) 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.
• B) The company has spent and expensed $1 million on R&D associated with the new project.
• C) The company spent and expensed $10 million on a marketing study before its current analysis regarding whether to accept or reject the project.
• D) 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.
• E) The new project is expected to reduce sales of one of the company's existing products by 5%.

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Definitions:

Manifestation of Assent

A term used in contract law to describe an outward expression by which one party signifies their agreement to the terms offered by another.

Conditional Acceptance

An agreement to accept an offer or proposal based on the fulfillment of certain conditions.

Inquiry

The act of seeking information by questioning or investigation.

Rejection

The refusal to accept, approve, or acknowledge something, especially referring to contractual or legal offers.