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

question 38

Multiple Choice

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

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

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Definitions:

Equal Dignity Rule

A legal doctrine requiring that contracts authorizing someone to conduct a transaction must be executed with the same formality as required for the transaction itself.

Statute of Frauds

A legal doctrine requiring certain types of contracts, such as for the sale of land or goods over a certain value, to be in writing to be enforceable.

Respondeat Superior

A legal doctrine holding employers liable for wrongful acts committed by employees while performing their job duties.

Independent Contractor

A person or entity contracted to perform work for another entity as a non-employee, responsible for their own taxes and benefits.