Chapter 10

Selling furniture to appliance customers.

Frank's is a furniture store that is considering adding appliances to its offerings. Which one of the following is the best example of an incremental cash flow related to the appliances?

Sunk

G & L Plastic Molders spent $1,200 last week repairing a machine. This week the company is trying to decide if the machine could be better utilized if they assigned it a proposed project. When analyzing the proposed project, the $1,200 should be treated as which type of cost?

Hiring additional employees to handle the increased workload should the firm accept the wreath project.

Kelley's Baskets makes handmade baskets for distribution to upscale retail outlets. The firm is currently considering making handmade wreaths as well. Which one of the following is the best example of an incremental operating cash flow related to the wreath project?

Equivalent annual cost.

The annual annuity stream of payments that has the same present value as a project's costs is referred to as which one of the following?

Amount of tax that is saved because of the depreciation expense.

The depreciation tax shield is best defined as the:

Stand-alone principle.

The fact that a proposed project is analyzed based on the project's incremental cash flows is the assumption behind which one of the following principles?

Which one of the following is an example of a sunk cost?

Which one of the following is an example of a sunk cost?

Money already spent for research and development of the new product.

Which one of the following should not be included in the analysis of a new product?