Implementing NPV

The value of currently unused warehouse space that will be used as part of a new project is...

• a sunk cost

• an opportunity cost

• an overhead expense

• irrelevant to the investment decision

Money that was/will be paid regardless of the decision to accept/reject the project is...

• a sunk cost

• cannibalization

• an overhead expense

• part of initial investment

A decrease in the sales of a current project because of the launching of a new project is...

• irrelevant to the investment decision

• cannibalization

• an overhead expense

• a sunk cost

Which of the following costs are relevant when estimating free cash flows for the project?

• sunk cost

• opportunity cost

• fixed overhead cost

• interest expense

You should choose the project with the lowest NPV in order to minimize present value of costs.

• True

• False

In capital budgeting, "Concorde effect" is a term that refers to...

• cannibalization

• synergy

• an opportunity cost

• a sunk cost

Earnings are not cash flows.

• True

• False

Which of the following is NOT a component of net working capital?

• Inventory

• Accounts receivable

• Property, plant, and equipment

• Accounts payable

If the company is profitable and pays taxes, what impact does depreciation have on cash flows?

• Positive

• Negative

• No impact

Relevant cash flows for a project are best described as...

• Incidental cash flows

• Incremental cash flows

• Sunk cash flows

• Accounting cash flows