Which of the following should be considered when a company estimates the cash flows used to analyze a proposed project?
A) The new project is expected to reduce sales of one of the company's existing products by 5%.
B) Since the firm's director of capital budgeting spent some of her time last year to evaluate the new project, a portion of her salary for that year should be charged to the project's initial cost.
C) The company has spent and expensed $1 million on R&D associated with the new project.
D) The company spent and expensed $10 million on a marketing study before its current analysis regarding whether to accept or reject the project.

Question

Quizplus · Accepted Answer

The expected sales reduction of an existing product is relevant in estimating the cash flows of the proposed project. The other options are not relevant in determining the cash flows of the project.

Which of the Following Should Be Considered When a Company