A Project Will Reduce the Amount of Inventory That a Firm

question 89

Multiple Choice

A project will reduce the amount of inventory that a firm must carry. What effect will this have on the project's cash flows if all inventory is purchased for cash?

• A) There will only be a cash outflow at time zero.
• B) There will be no effect on the cash flows since the inventory has already been paid for.
• C) There will be a cash outflow at time zero and an equal cash inflow when the project ends.
• D)There is an assumed cash outflow equal to the inventory reduction at the end of the project.

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Definitions:

Ultra Vires

Acts or decisions made by an entity that are beyond the scope of powers granted by its constitution or laws.

Articles of Incorporation

Legal document filed with a governmental entity to legally establish a corporation.

Incorporator

The person or entity that files the incorporation papers with the state to legally form a corporation.

Domestic Corporation

A corporation in the state in which it is incorporated.