Which of the Following Statements Is Correct

question 10

Multiple Choice

Which of the following statements is correct?

• A)A firm has estimated that it will save $40,000 in utility expenses annually if it replaces an old machine with a new, more technologically advanced machine. The $40,000 is a relevant cash flow that should be included in the computation of the machine's supplemental operating cash flows.
• B)Inflation does not need to be considered in capital budgeting analyses.
• C)The tax deduction associated with a project's depreciation expense is not a relevant cash flow in capital budgeting analyses.
• D)The sunk costs associated with a project are relevant cash flows that should be included in capital budgeting analyses.
• E)The cost of advertising a product that the firm currently produces and sells is a relevant cash flow that should be included in the evaluation of a new capital budgeting project.

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Definitions:

Economic Issues

Problems or challenges facing an economy, ranging from unemployment to inflation, affecting the well-being of its citizens.

Median Voter Theorem

A theory that suggests the outcome of a majority vote is most likely to match the preferences of the median voter.

Majority-Rule

A decision-making process that follows the principle that the opinions or preferences of more than half of the members of a group have the authority to make decisions binding on the whole group.

Median Voter

A theoretical concept in political science and economics suggesting that the outcome of a majority rule voting process will reflect the preferences of the median voter when preferences are single-peaked.