One Purpose of Identifying All of the Incremental Cash Flows

question 16

Multiple Choice

One purpose of identifying all of the incremental cash flows related to a proposed project is to:

• A) isolate the total sunk costs so they can be evaluated to determine if the project will add value to the firm.
• B) eliminate any cost which has previously been incurred so that it can be omitted from the analysis of the project.
• C) make each project appear as profitable as possible for the firm.
• D) include both the proposed and the current operations of a firm in the analysis of the project.
• E) identify any and all changes in the cash flows of the firm for the past year so they can be included in the analysis.

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Definitions:

Price Ceilings

Government-imposed limits on how high a price can be charged for a product or service, aimed at protecting consumers.

Ration Coupons

Documents or certificates that allow the holder to purchase a certain amount of a product, used especially during shortages to ensure fair distribution.

Government-mandated Increase

A requirement imposed by the government that results in a rise, often relating to wages, prices, or taxes.

Demand and Supply Curves

Graphs used in economics to illustrate the relationship between how much of a good or service is desired by buyers (demand) and how much is available from suppliers (supply) at various prices.