When Conducting a Capital Budgeting Analysis and Attempting to Account

question 40

Multiple Choice

When conducting a capital budgeting analysis and attempting to account for effects of exchange rate movements for a foreign project, inflation ____ included explicitly in the cash flow analysis, and debt payments by the subsidiary ____ included explicitly in the cash flow analysis.​

• A) ​should be; should be
• B) ​should definitely not be; should definitely not be
• C) ​should definitely not be; should be
• D) ​should be; should definitely not be

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Definitions:

Sales

The total revenue generated from goods or services sold by a company over a specified period.

Pretax Income

The amount of income earned by a business before any taxes have been deducted.

Fixed Costs

Fixed costs are business expenses that do not change with the level of goods or services produced by the business, such as rent, salaries, and insurance.

Variable Costs

Costs that vary directly with the level of production or sales volume, such as materials and labor directly involved in manufacturing a product.