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Question
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.
Answer
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Related questions
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In a portfolio of three different stocks, which of the following could NOT be true?
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b. The beta of the portfolio is less than the betas of each of the individual stocks.
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From the lessee viewpoint, the riskiness of the cash flows, with the possible exception of the residual value, is about the same as the riskiness of the lessee's
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d. It is possible for a firm to go public and yet not raise any additional new capital.
e. When a corporation's shares are owned by a few individuals who own most of the stock or are part of the firm's management, we say that the firm is "closely, or privately, held."
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If a company increases its safety stock, then its EOQ will go up.
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Suppose that you're planning a vacation and borrow $2,000 from a bank for one year at a stated annual interest rate of 14 percent, with interest prepaid (a discounted loan). Also, assume that the bank requires you to maintain a compensating balance equal to 20 percent of the initial loan value. What effective annual interest rate are you being charged?a. 14.00%b. 8.57%c. 16.28%d. 21.21%e. 28.00%
Q:
Which of the following is not correct for a firm with seasonal sales and customers who all pay promptly at the end of 30 days?
a. The quarterly uncollected balances schedule will be the same in each quarter.
b. The level of accounts receivable will be constant from month to month.
c. The ratio of accounts receivable to sales will vary from month to month.
d. The level of accounts receivable at the end of each quarter will be the same.
e. DSO will vary from month to month.
Q:
DSO analysis of accounts receivable is the most robust way to see if customers are, on average, paying more slowly, because it is unaffected by seasonal changes in sales.
a. True
b. False