In Estimating the Cost of a New Project, the Firm

question 203

Multiple Choice

In estimating the cost of a new project, the firm should exclude:

• A)opportunity costs.
• B)fixed costs.
• C)variable costs.
• D)alternative costs.
• E)b and c

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Definitions:

Operating Activities

Day-to-day actions that a company takes in conducting its business, such as selling products, managing costs, and paying wages.

Net Income

The total profit or loss of a company after all revenues and expenses have been accounted for, also known as net earnings.

Indirect Method

A method for preparing the cash flow statement where net income is adjusted for non-cash transactions and changes in working capital to calculate net cash from operating activities.

Financing Activities

Transactions and events that affect the long-term liabilities and equity of an entity, typically involving the inflow of cash from investors or banks.