Question
Which of the following statements is true regarding a replacement decision? a. The depreciation expenses on the new equipment is treated as an outflow. b.
Which of the following statements is true regarding a replacement decision?
a.The depreciation expenses on the new equipment is treated as an outflow.
b.The benefits resulting from the new investment is treated as an inflow.
c.The net cash flow from the sale of an old equipment is treated as an outflow at t = 0 (initial investment outlay).
d.An increase in the net working capital is treated as an inflow when the project begins (initial investment outlay) and as an outflow when the project ends (terminal cash flow).
e.Any loss on the sale of the old equipment is multiplied by the tax rate and is treated as an outflow at t = 0 (initial investment outlay).
Which of the following statements is true about relevant cash flows?
a.Inflation during the project's lifetime is a relevant cash flow.
b.Day-to-day operating cash flows of a project are relevant cash flows.
c.Sunk costs of engineering study to determine the feasibility of a project are relevant cash flows.
d.Opportunity cost of land being used for the project that the firm already owns is a relevant cash flow.
e.Depreciation expenses not relevant cash flows to be considered in the cash flow of a project.
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