Collins Inc

question 72

Multiple Choice

Collins Inc.is investigating whether to develop a new product.In evaluating whether to go ahead with the project, which of the following items should NOT be explicitly considered when cash flows are estimated?

• A) The project will utilize some equipment the company currently owns but is not now using.A used equipment dealer has offered to buy the equipment.
• B) The company has spent and expensed for tax purposes $3 million on research related to the new detergent.These funds cannot be recovered, but the research may benefit other projects that might be proposed in the future.
• C) The new product will cut into sales of some of the firm's other products.
• D) If the project is accepted, the company must invest $2 million in working capital.However, all of these funds will be recovered at the end of the project's life.
• E) The company will produce the new product in a vacant building that was used to produce another product until last year.The building could be sold, leased to another company, or used in the future to produce another of the firm's products.

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Definitions:

Quantitative Changes

Changes that can be measured or quantified, typically referring to growth or alteration in size, amount, or degree.

Documenting

involves the process of recording or capturing information for the purpose of preserving or providing evidence.

Vocabulary

The set of words that an individual knows and uses in their language or in a particular subject.

Mechanistic

Describes a view or theory that attributes the phenomena of life to mechanical processes, without reference to consciousness or intent.