New Projects or Products Can Have Multiple Effects on a Firm

question 42

Multiple Choice

New projects or products can have multiple effects on a firm. Which one of the following appears to be a potentially positive indirect effect?

• A) Any additional working capital required can be recouped at project's end.
• B) The sales force will need to be increased over the life of the project.
• C) Sales of replacement parts are expected to occur in the future.
• D)The cost of employee benefits will increase due to new hires.

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Definitions:

Futures Contract

A standardized legal agreement to buy or sell a specific commodity or asset at a predetermined price at a specified time in the future.

Interest Rate Collar

A financial derivative strategy used to limit the range of possible interest rates movements by buying and selling interest rate options.

Variable Rate Loan

A loan where the interest rate can fluctuate over time based on changes in an underlying benchmark interest rate or index.

Discount Rate

The interest rate used to determine the present value of future cash flows.