Which of the following does not have incremental cash flow effects and thus shou

Question

Which of the following does not have incremental cash flow effects and thus should not be considered in capital budgeting decisions? a. a firm has a parcel of land that can be used for a new plant site, be sold, or be used for agricultural purposes. b. 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. c. a firm must obtain new equipment for the project and $1 million of costs for shipping and installing the new machinery will be required. d. 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 if the new project is rejected. e. a firm can produce a new product, and the existence of that product will stimulate sales of some of the firm's other products.

Explanation / Answer

Which of the following does not have incremental cash flow effects and thus should not be considered in capital budgeting decisions?

a. a firm has a parcel of land that can be used for a new plant site, be sold, or be used for agricultural purposes.

b. 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.

c. a firm must obtain new equipment for the project and $1 million of costs for shipping and installing the new machinery will be required.

d. 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 if the new project is rejected-correct answer

. e. a firm can produce a new product, and the existence of that product will stimulate sales of some of the firm's other products.

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