Which of the Following Cash Flows Are NOT Considered in the Calculation

question 67

Multiple Choice

Which of the following cash flows are NOT considered in the calculation of the initial outlay for a capital investment proposal?

• A)Training expense
• B)Working capital investments
• C)Installation costs of an asset
• D)Before-tax selling price of old machine

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Definitions:

Diseconomies of Scale

The phenomenon where, as a firm expands, its costs start increasing per unit of output, usually due to inefficiencies and management challenges that arise with size.

Diminishing Returns

A principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase and may decrease.

Natural Monopoly

A market structure where a single provider is more efficient in supplying the entire market with a product or service, due to high fixed or startup costs.