Which of the Following Factors Should Be Included in the Cash

question 56

Multiple Choice

Which of the following factors should be included in the cash flows used to estimate a project's NPV?

• A) Interest on funds borrowed to help finance the project.
• B) The end-of-project recovery of any working capital required to operate the project.
• C) Cannibalization effects, but only if those effects increase the project's projected cash flows.
• D) Expenditures to date on research and development related to the project, provided those costs have already been expensed for tax purposes.
• E) All costs associated with the project that have been incurred prior to the time the analysis is being conducted.

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Definitions:

Total Fixed Cost

The sum of all costs that remain constant regardless of the level of production or sales activity within a certain period.

Activity Level

A measure of the volume of production or operations, often influencing costs and used to adjust budgets or forecasts in business.

Net Operating Income

The profit realized from a business's operations after deducting operating expenses such as wages, depreciation, and cost of goods sold (COGS).

Planning Budget

A budget created at the beginning of the planning period that is based on projected levels of activity.