New Project Evaluation

When evaluating a new project, firms should include in the projected cash flows all of the following EXCEPT:

Answer

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Changes in net working capital attributable to the project.

Previous expenditures associated with a market test to determine the feasibility of the project, provided those costs have been expensed for tax purposes.

The value of a building owned by the firm that will be used for this project.

A decline in the sales of an existing product, provided that decline is directly attributable to this project.

The salvage value of assets used for the project that will be recovered at the end of the project’s life.