Kelley's Baskets Makes Handmade Baskets and Is Currently Considering Making

question 84

Multiple Choice

Kelley's Baskets makes handmade baskets and is currently considering making handmade wreaths as well. Which one of the following is the best example of an incremental operating cash flow related to the wreath project?

• A) Storing supplies in the same space currently used for materials storage
• B) Utilizing the basket manager to oversee wreath production
• C) Hiring additional employees to handle the increased workload should the firm accept the wreath project
• D) Researching the market to determine if wreath sales might be profitable before deciding to proceed
• E) Planning on lower interest expense by assuming the proceeds of the wreath sales will be used to reduce the firm's currently outstanding debt

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Definitions:

Borrowed Funds

Money obtained through loans or debt financing, which needs to be repaid over time, usually with interest.

Capital Budgeting

The process of planning and managing a company's long-term investments in major projects or assets.

Internal Rate

Generally refers to the internal rate of return (IRR), which is a metric used in capital budgeting to estimate the profitability of potential investments.

Cash Flows

The net amount of cash and cash-equivalents being transferred into and out of a business.