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Diano4ka-milaya [45]
3 years ago
7

To increase productive capacity, a company is considering a proposed new plant. Which of the following statements is CORRECT? a.

When estimating the project's operating cash flows, it is important to include both opportunity costs and sunk costs, but the firm should ignore the cash flow effects of externalities since they are accounted for in the discounting process. b. Since depreciation is a non-cash expense, the firm does not need to deal with depreciation when calculating the operating cash flows. c. The cost of capital used to discount cash flows in a capital budgeting analysis should be calculated on a before-tax basis. d. Capital budgeting decisions should be based on before-tax cash flows. e. In calculating the project's operating cash flows, the firm should not deduct financing costs such as interest expense, because financing costs are accounted for by discounting at the cost of capital. If interest were deducted when estimating cash flows, this would, in effect, "double count" it.
Business
1 answer:
Ganezh [65]3 years ago
6 0

Answer:

e. In calculating the project's operating cash flows, the firm should not deduct financing costs such as interest expense, because financing costs are accounted for by discounting at the cost of capital. If interest were deducted when estimating cash flows, this would, in effect, "double count" it.

Explanation:

Weighted average cost of capital (WACC) is a calculation that takes into consideration all cost associated with capital obtained to finance a company.

This also includes cost such as interest expense.

In the given scenario when calculating the project's operating cash flow it is important to exclude such financing costs since they have been considered in the WACC calculation.

It will be a double deduction if it is considered again in operating cash flow calculation.

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The next thing to occur would be B. the price level in the economy will rise and the money demand will decrease

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This refers to the amount of money that is added to be paid back on the settlement of a loan.

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6 0
1 year ago
Factory Overhead Volume Variance Dvorak Company produced 5,100 units of product that required 3.5 standard hours per unit. The s
AveGali [126]

Answer:

$2,250 Favourable

Explanation:

Calculation to determine the fixed factory overhead volume variance

Fixed factory overhead volume variance=$2.50 × [18,750 hrs. – (5,100 units × 3.5 hrs.)]

Fixed factory overhead volume variance=$2.50×[18,750 hrs. – 17,850 hrs]

Fixed factory overhead volume variance=$2.50×900

Fixed factory overhead volume variance=$2,250 Favourable

Therefore the fixed factory overhead volume variance will be $2,250 Favourable

5 0
3 years ago
If the actual output of a piece of equipment during an hour is 500 units and it's best operating level is at a rate of 400 units
lesya [120]

Answer:

C. 1.25

Explanation:

Mathematically;

Capacity utilization rate= actual output per hour / operating level rate per hour

Actually output per hour= 500units

Operating level rate per hour= 400

Hence,

Capacity utilization rate= 500/400

Capacity utilization rate= 1.25

4 0
3 years ago
Which of the following statements is correct? a. If the monopolist's marginal revenue is greater than its marginal cost, the mon
Artist 52 [7]

Answer:<u><em>If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling more units at a lower price per unit. </em></u>

Explanation:

If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling more units at a lower price per unit. In the case of higher MR , the maximum profit will come about at the level of where MR is equal to the MC. So in this case to increase the profit, MR i,e, also the price can be lower to the level of MC to sell more commodity and earn higher profits.

7 0
3 years ago
Everything Looks Like a Nail, Inc. is a manufacturing company that produces hammers. The company faces a number of different fix
nikitadnepr [17]

Answer:

a. Regulatory compliance costs  - Fixed cost

b. Salaries of top management and key personnel - Fixed cost

c. Cost of metal used in manufacturing  - Variable cost

d. Cost of wood used in manufacturing  - Variable cost

e. Mortgage payments  - Fixed cost

f. Industrial equipment costs  - Fixed cost

g. Interest on debt  - Fixed cost

h. Postage and packaging costs - Variable cost

Explanation:

The cost which is affected by the production of units is known as variable cost. The cost which does not vary with the units produced is fixed cost. Fixed cost does not change from period to period irrespective of level of output and is usually same for a certain period. It is easy to budget for fixed costs instead of variable cost. Variable cost changes every period and is based on company's output.

6 0
2 years ago
Read 2 more answers
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