In Evaluating the Initial Investment for a Capital Budgeting Project

question 30

Multiple Choice

In evaluating the initial investment for a capital budgeting project, ________.

• A) an increase in net working capital is considered a cash inflow
• B) a decrease in net working capital is considered a cash outflow
• C) an increase in net working capital is considered a cash outflow
• D) net working capital does not have to be considered

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Definitions:

Breach of Condition

A Breach of Condition refers to the failure to meet a condition stated in a contract, which is so fundamental that it allows the other party to terminate the contract and seek compensation for damages.

Warranty

A guarantee provided by a manufacturer or seller regarding the condition of a product and a promise of repair or replacement if the product does not meet specified criteria.

Government Bonds

Debt securities issued by a government to finance its expenditures, offering a fixed or variable interest rate over time.

Private Company

A business entity owned by private individuals or entities, not publicly traded on the stock market, and not subject to the same reporting requirements as a public company.