When Evaluating a New Project, Firms Should Include in the Projected

question 47

Multiple Choice

When evaluating a new project, firms should include in the projected cash flows all of the following EXCEPT:

• A) previous expenditures associated with a market test to determine the feasibility of the project, provided those costs have been expensed for tax purposes.
• B) the value of a building owned by the firm that will be used for this project.
• C) a decline in the sales of an existing product, provided that decline is directly attributable to this project.
• D) the salvage value of assets used for the project that will be recovered at the end of the project's life.
• E) changes in net working capital attributable to the project.

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Definitions:

Fund Raising

The process of gathering voluntary contributions of money or other resources, typically for non-profit organizations or to finance a particular project or venture.

Tender Their Shares

The act of a shareholder submitting their stocks in response to a buyout offer.

Initial Public Offering

The process by which a private company offers shares of stock to the public for the first time.

Capital Contributions

Financial or other assets given to a company by its owners or shareholders to increase its equity or meet its financing needs.