Which One of the Following Would NOT Result in Incremental

question 28

Multiple Choice

Which one of the following would NOT result in incremental cash flows and thus should NOT be included in the capital budgeting analysis for a new product?

• A) A new product will generate new sales, but some of those new sales will be from customers who switch from one of the firm's current products.
• B) A firm must obtain new equipment for the project, and $1 million is required for shipping and installing the new machinery.
• C) A firm has spent $2 million on R&D associated with a new product.These costs have been expensed for tax purposes, and they cannot be recovered regardless of whether the new project is accepted or rejected.
• D) A firm can produce a new product, and the existence of that product will stimulate sales of some of the firm's other products.
• E) A firm has a parcel of land that can be used for a new plant site or be sold, rented, or used for agricultural purposes.

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Definitions:

Practical Wisdom

Practical wisdom, or phronesis, is an intellectual virtue that involves making prudent judgments and decisions based on ethical considerations and practical understanding of everyday life.

Excellent Character

Possessing outstanding moral or ethical qualities.

Golden Mean

A concept from Aristotelian ethics that represents the desirable middle between two extremes, one of excess and the other of deficiency.

Rightly

In a manner or to an extent that is justified, appropriate, or correct.