Which of the Following Statements Is Correct

question 127

Multiple Choice

Which of the following statements is correct?

• A) Capital budgeting analysis for expansion and replacement projects is essentially the same because the types of cash flows involved are the same.
• B) In estimating supplemental operating cash flows for the purpose of capital budgeting,interest payments should not be included since the effects of these payments are already included in the rate of return the firm is required to earn from its investments.
• C) When equipment is sold,companies receive a tax credit as long as the salvage value is less than the initial cost of the equipment.
• D) All of the above answers are correct.
• E) None of the above answers is correct.

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Definitions:

Market Price

The latest price point at which an asset or service can be acquired or disposed of.

Acquisition

The process by which one company takes over controlling interest in another company.

Merger Premium

The additional amount paid over the current market value of a company during a merger or acquisition.

Shares Outstanding

The total number of a company's shares that are currently owned by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.