You can come across different situations in your life where the concepts from capital budgeting will help you in evaluating the situation and making calculated decisions. Consider the following situation: The following table contains five definitions or concepts. Identify the term that best corresponds to the concept or definition given. Term Concept or Definition The specific cash flows that should be considered in a capital budgeting decision A cost that has been incurred and may be related to a project but should not be part of the decision to accept or reject a project The cost of not choosing another mutually exclusive project by accepting a particular project The effects on other parts of the firm The cash flows that the asset or project is expected to generate over its life Alexander Industries owns a warehouse that it is not currently using. It could sell the warehouse for $300,000 or use the warehouse in a new project. Should Alexander Industries include the value of the warehouse as part of the initial investment in the new project? Yes, because the firm could sell the warehouse if it didn't use it for the new project. O No, because the cost of the warehouse is a sunk cost. O No, because the company will still be able to sell the warehouse once the project is complete. A paper manufacturer has built a plant that meets all government-mandated environmental regulations, but the plant still produces an unpleasant odor when it is being operated. Many residents in the area dislike the paper mill because of these unpleasant odors. This is an example of externality