Use Scenario 1 to answer the question. What is the firm?s P/E ratio?

Holding all other things constant, which of the following represents a cash outflow for a firm?

The company sells a machine.

The company acquires inventory.

The company receives a bank loan.

The company increases accounts payable.

Capital budgeting must be placed on an incremental basis. This means that __________ must be ignored and _________ must be considered.

sunk cost; opportunity cost

sunk cost; financing cost

cannibalization; opportunity cost

opportunity cost; net working capital