Which of the following statements is correct?
A)In a capital budgeting analysis where part of the funds used to finance the project are raised as debt, failure to include interest expense as a cost when determining the project's cash flows will lead to an upward bias in the NPV.
B)The existence of any type of "externality" will reduce the calculated NPV versus the NPV that would exist without the externality.
C)If one of the assets to be used by a potential project is already owned by the firm, and if that asset could be leased to another firm if the new project were not undertaken, then the net rent that could be obtained should be charged as a cost to the project under consideration.
D)If one of the assets to be used by a potential project is already owned by the firm but is not being used, then any cost associated with that asset is a sunk cost and should be ignored.

Question

Quizplus · Accepted Answer

The opportunity cost of using an asset that could be leased out should be considered in the project's cash flows, as it represents a foregone benefit.

Which of the Following Statements Is Correct