A Manufacturing Firm Is Planning on Expanding Its Existing Operations

question 15

Multiple Choice

A manufacturing firm is planning on expanding its existing operations. The expansion project is significant and will require the firm to house the expansion in a different location. The firm is considering building on a lot they own across town. The lot is currently vacant and it was paid for nearly 20 years ago. Given this information, which of the following statements is correct?

• A) The lot is not an incremental cash flow because it is not being utilized at this time.
• B) The lot is an incremental cash flow because it represents an opportunity cost.
• C) The lot is an incremental cash flow because it represents a sunk cost.
• D) The lot is not an incremental cash flow because it has already been paid for.

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Definitions:

Lewis Theory

A theory in chemistry that explains chemical bonding by electron pair sharing and transfer between atoms, aiming for a stable octet arrangement.

Noble Gas

Any of the inert gas elements located in the rightmost column of the periodic table, characterized by their lack of chemical reactivity.

Valence Shells

The outermost shell of an atom that contains the electrons involved in forming bonds.

Noble Gas Elements

Elements in group 18 of the periodic table, known for their lack of reactivity due to having full valence electron shells.