A Proposed Project Will Reduce the Amount of Inventory a Firm

question 36

Multiple Choice

A proposed project will reduce the amount of inventory a firm must keep on hand.This effect:

• A)should be ignored when analysing the viability of the project
• B)is a cash outflow relevant to the first year of the project
• C)is an initial cash inflow that should be included in the analysis
• D)is a negative capital expenditure at time zero
• E)is an erosion cost and should be included in the annual net income of the project

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