The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is reduction in company sales due to investment. Incremental Cash Flow: The addition to the current cash flow of the company based on the acceptance of the new project or expansion plan is called additional cash flow. It is used to evaluate the financial viability of different alternatives. Opportunity Cost : Opportunity cost means the cost of missed opportunity. It refers to the advantage that a company could have gained, but gave up, to take an alternative action.

Question

Want to see the full answer?

Answer 1

Question

Chapter 6, Problem 2CQ

a.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is reduction in company sales due to investment.

Incremental Cash Flow:

The addition to the current cash flow of the company based on the acceptance of the new project or expansion plan is called additional cash flow. It is used to evaluate the financial viability of different alternatives.

Opportunity Cost:

Opportunity cost means the cost of missed opportunity. It refers to the advantage that a company could have gained, but gave up, to take an alternative action.

b.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is expenses on equipment and plants are not made and would be made on acceptance of project.

c.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is research cost in relation to product in the last 3 years.

Sunk Cost:

Sunk cost means that cost that has been incurred in the past and has no effect on the future project. It is that cost that is related to past events that cannot be recovered and is irrelevant for the new projects of a company.

d.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is annual expense of depreciation on investment.

e.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is dividend payments.

f.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, items are plant and equipment resale value end of project life.

g.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, items are medical costs and salary given to production personnel.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

What name is given to the time value of money technique that discounts the after-tax cash flows for a project over its life to time period zero using the company’s minimum desired rate of return? a. net present value method b. capital rationing methodc. payback method d. average rate of return method e. accounting rate of return method

Calculate the Accrual accounting rate of return based on net initial investment (Assume straight-line depreciation.Use the average annual savings in cash operating costs when computing the numerator of the accrualaccounting rate of return.) for the special-purpose bottling machine.

In estimating "after-tax incremental operating cash flows" for a project, you should include all of the following except __________. a. changes in working capital resulting from the project, net of spontaneous changes in current liabilities b. changes in costs due to a general appreciation in those costs c. the amount (net of taxes) that we could realize from selling a currently unused building of ours that we intend to use for our project d. costs that have previously been incurred that are unrecoverable

Answer 2

Question

Chapter 6, Problem 2CQ

a.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is reduction in company sales due to investment.

Incremental Cash Flow:

The addition to the current cash flow of the company based on the acceptance of the new project or expansion plan is called additional cash flow. It is used to evaluate the financial viability of different alternatives.

Opportunity Cost:

Opportunity cost means the cost of missed opportunity. It refers to the advantage that a company could have gained, but gave up, to take an alternative action.

b.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is expenses on equipment and plants are not made and would be made on acceptance of project.

c.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is research cost in relation to product in the last 3 years.

Sunk Cost:

Sunk cost means that cost that has been incurred in the past and has no effect on the future project. It is that cost that is related to past events that cannot be recovered and is irrelevant for the new projects of a company.

d.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is annual expense of depreciation on investment.

e.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is dividend payments.

f.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, items are plant and equipment resale value end of project life.

g.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, items are medical costs and salary given to production personnel.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 6, Problem 2CQ

a.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is reduction in company sales due to investment.

Incremental Cash Flow:

The addition to the current cash flow of the company based on the acceptance of the new project or expansion plan is called additional cash flow. It is used to evaluate the financial viability of different alternatives.

Opportunity Cost:

Opportunity cost means the cost of missed opportunity. It refers to the advantage that a company could have gained, but gave up, to take an alternative action.

b.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is expenses on equipment and plants are not made and would be made on acceptance of project.

c.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is research cost in relation to product in the last 3 years.

Sunk Cost:

Sunk cost means that cost that has been incurred in the past and has no effect on the future project. It is that cost that is related to past events that cannot be recovered and is irrelevant for the new projects of a company.

d.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is annual expense of depreciation on investment.

e.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is dividend payments.

f.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, items are plant and equipment resale value end of project life.

g.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, items are medical costs and salary given to production personnel.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 6, Problem 2CQ

a.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is reduction in company sales due to investment.

Incremental Cash Flow:

The addition to the current cash flow of the company based on the acceptance of the new project or expansion plan is called additional cash flow. It is used to evaluate the financial viability of different alternatives.

Opportunity Cost:

Opportunity cost means the cost of missed opportunity. It refers to the advantage that a company could have gained, but gave up, to take an alternative action.

b.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is expenses on equipment and plants are not made and would be made on acceptance of project.

c.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is research cost in relation to product in the last 3 years.

Sunk Cost:

Sunk cost means that cost that has been incurred in the past and has no effect on the future project. It is that cost that is related to past events that cannot be recovered and is irrelevant for the new projects of a company.

d.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is annual expense of depreciation on investment.

e.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is dividend payments.

f.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, items are plant and equipment resale value end of project life.

g.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, items are medical costs and salary given to production personnel.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 6, Problem 2CQ

a.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is reduction in company sales due to investment.

Incremental Cash Flow:

The addition to the current cash flow of the company based on the acceptance of the new project or expansion plan is called additional cash flow. It is used to evaluate the financial viability of different alternatives.

Opportunity Cost:

Opportunity cost means the cost of missed opportunity. It refers to the advantage that a company could have gained, but gave up, to take an alternative action.

b.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is expenses on equipment and plants are not made and would be made on acceptance of project.

c.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is research cost in relation to product in the last 3 years.

Sunk Cost:

Sunk cost means that cost that has been incurred in the past and has no effect on the future project. It is that cost that is related to past events that cannot be recovered and is irrelevant for the new projects of a company.

d.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is annual expense of depreciation on investment.

e.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is dividend payments.

f.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, items are plant and equipment resale value end of project life.

g.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, items are medical costs and salary given to production personnel.

Answer 6

Chapter 6, Problem 2CQ

a.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is reduction in company sales due to investment.

Incremental Cash Flow:

The addition to the current cash flow of the company based on the acceptance of the new project or expansion plan is called additional cash flow. It is used to evaluate the financial viability of different alternatives.

Opportunity Cost:

Opportunity cost means the cost of missed opportunity. It refers to the advantage that a company could have gained, but gave up, to take an alternative action.

Answer 7

Chapter 6, Problem 2CQ

a.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is reduction in company sales due to investment.

Incremental Cash Flow:

The addition to the current cash flow of the company based on the acceptance of the new project or expansion plan is called additional cash flow. It is used to evaluate the financial viability of different alternatives.

Opportunity Cost:

Opportunity cost means the cost of missed opportunity. It refers to the advantage that a company could have gained, but gave up, to take an alternative action.

Answer 8

b.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is expenses on equipment and plants are not made and would be made on acceptance of project.

Answer 9

b.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is expenses on equipment and plants are not made and would be made on acceptance of project.

Answer 10

c.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is research cost in relation to product in the last 3 years.

Sunk Cost:

Sunk cost means that cost that has been incurred in the past and has no effect on the future project. It is that cost that is related to past events that cannot be recovered and is irrelevant for the new projects of a company.

Answer 11

c.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is research cost in relation to product in the last 3 years.

Sunk Cost:

Sunk cost means that cost that has been incurred in the past and has no effect on the future project. It is that cost that is related to past events that cannot be recovered and is irrelevant for the new projects of a company.

Answer 12

d.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is annual expense of depreciation on investment.

Answer 13

d.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is annual expense of depreciation on investment.

Answer 14

e.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is dividend payments.

Answer 15

e.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is dividend payments.

Answer 16

f.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, items are plant and equipment resale value end of project life.

Answer 17

f.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, items are plant and equipment resale value end of project life.

Answer 18

g.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, items are medical costs and salary given to production personnel.

Answer 19

g.

Summary Introduction

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, items are medical costs and salary given to production personnel.

Answer 20

Expert Solution & Answer

Answer 21

Expert Solution & Answer

Answer 22

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 23

Ch. 6 - Opportunity Cost In the context of capital...Ch. 6 - Prob. 2CQ Ch. 6 - Incremental Cash Flows Your company currently...Ch. 6 - Depreciation Given the choice, would a firm prefer...Ch. 6 - Prob. 5CQ Ch. 6 - Prob. 6CQ Ch. 6 - Equivalent Annual Cost When is EAC analysis...Ch. 6 - Prob. 8CQ Ch. 6 - Capital Budgeting Considerations A major college...Ch. 6 - To answer the next three questions, refer to the...

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is expenses on equipment and plants are not made and would be made on acceptance of project.

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is annual expense of depreciation on investment.

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, the item is dividend payments.

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, items are plant and equipment resale value end of project life.

To identify: The items that should be treated as incremental cash flow when computing the net present value (NPV) of an investment. Here, items are medical costs and salary given to production personnel.

Want to see the full answer?

Chapter 6 Solutions