Some of the Factors (With Selected Explanations)used in Calculating the Basic

question 17

Multiple Choice

Some of the factors (with selected explanations) used in calculating the basic "net present value" and the "incremental" cash flows of a capital project are: (i) expected after-tax terminal value,including recapture of working capital
(ii) net income,which belongs to the equity holders of the firm
(iii) initial investment at inception
(iv) depreciation,and the fact that depreciation is a noncash expense (i.e.,it is removed from the calculation of net income,for tax purposes,but added back because it did not actually flow out of the firm) (v) weighted-average cost of capital
(vi) the firm's after-tax payment of interest to debtholders
(vii) economic life of the capital project in years
The "incremental" cash flows of a capital project is calculated by using

• A)(i),(ii),and (iii).
• B)(ii),(iv),and (vi).
• C)(i),(iii),(v),and (vii).
• D)(iv),(v),(vi),and (vii).

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Definitions:

Effectively

In a manner that produces the intended or desired result with efficiency.

Exchange Process

The act of giving one thing and receiving another, especially in terms of goods, services, or monetary value, between parties.

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A zone that is 4 to 12 feet from a person and is the area normally used for sales presentations.

Selling Situation

A context or environment in which a sales transaction takes place, affecting the strategies and approaches used by salespeople.