Question

Which of the following would not be included in calculating the incremental cash flow for a project? The firm expects sales of the new product to be $5,000,000 per year. Working capital will decrease by $100,000 at t=0 The firm must pay $3,000,000 for equipment to produce the new drink. The firm expects sales of existing drinks to decrease by $500,000 per year because current customers will switch to the new drink. The property on which the plant will be built has bought in 1950 for $10,000.

Answer 1

Answer:

The property on which the plant will be built has bought in 1950 for $10,000.

Explanation:

would not be included

sales represent cash proceeds, so should be considered.

decrease in working capital, means assets decrease, cash is release to be used in something else

decrease in sales for another product also involve cash.

the cost of the property is irrelevant for the cash flow  for this product. it would not change the convinience in releasing a new drink the value of the property on 1950