Which of the Following Should Be Considered When a Company

question 64

Multiple Choice

Which of the following should be considered when a company estimates the cash flows used to analyze a proposed project?

• A) Since the firm's director of capital budgeting spent some of her time last year to evaluate the new project, a portion of her salary for that year should be charged to the project's initial cost.
• B) The company has spent and expensed $1 million on R&D associated with the new project.
• C) The company spent and expensed $10 million on a marketing study before its current analysis regarding whether to accept or reject the project.
• D) The firm would borrow all the money used to finance the new project, and the interest on this debt would be $1.5 million per year.
• E) The new project is expected to reduce sales of one of the company's existing products by 5%.

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Definitions:

Payoff

The return or gain that an individual receives from an investment or action.

Strategy

A plan of action or policy designed to achieve a major or overall goal, especially in business or politics.

Second Job

Employment taken in addition to one's primary job to supplement income, often requiring balancing multiple work schedules.

Full Time

Refers to employment where individuals work a complete or standard number of hours considered typical for the job, usually around 35 to 40 hours per week.