Which are incremental cash flows

Assignment Help Financial Management
Reference no: EM131303983

To help distinguish opportunity costs and incremental cash flows, consider these four examples:

1) A firm spends $100,000 on a project, when it could invest the money and earn a 10% return.

2) A firm is renting out office space for $5,000/month, but will use the office space for a new project.

3) A firm will hire a new employee for $100,000/year to head up a new project.

4) A firm paid $100,000 five years ago, but the land is unusable for the current project.

Which of these are opportunity costs? Which are incremental cash flows?

Reference no: EM131303983

Questions Cloud

What have you learned that can be used in your dissertation : Think about what you have learned in your program up to and including this course. What have you learned that can be used in your dissertation work? Have you learned something that has made you change your topic or reinforced your topic choice?
Stages involved in the process of establishing prices : Identify the six stages involved in the process of establishing prices.- How does a return on investment pricing objective differ from an objective of increasing market share?
Calculate the project’s terminal cash flow in year : Consider the following project being evaluated by your company: ¥ Initial price of the asset is $200,000 will require $15,000 transportation and $5,000 installation. ¥ Will be depreciated S/L over 4 years to a $5,000 salvage. Calculate the project ca..
Calculate the markup as a percentage of cost : A retailer purchases a can of soup for 24 cents and sells it for 36 cents. Calculate the markup as a percentage of cost and as a percentage of selling price.
Which are incremental cash flows : To help distinguish opportunity costs and incremental cash flows, consider these four examples: Which of these are opportunity costs? Which are incremental cash flows?
What is differential pricing : For what types of products would price skimming be most appropriate? For what types of products would penetration pricing be more effective?
Develop a sales budget for the la babycakes store : Prepare a sales budget for the LA Babycakes store for the 4th quarter of 2016. Present the number of units, sales price, and total sales for each month; include October, November, and December.
Advantages and disadvantages of using everyday low prices : Describe bundle pricing, and give three examples using different industries.- What are the advantages and disadvantages of using everyday low prices?
Selling strategy that yields risk-less profit at expiration : Suppose that P is the price of a European put option to sell a security whose present price is S. Let K be the strike price of the option. Show that if P > K then there is a buying and/or selling strategy that yields risk-less profit at expiration (i..

Reviews

Write a Review

Financial Management Questions & Answers

  What is the present value of the savings

You are thinking of building a new machine that will save your company $1,000 in the rst year. The machine will then begin to wear out so that the savings decline at a rate of 2% per year forever. What is the present value of the savings if the inter..

  The wear-and-tear cost of operating your car

You need to get gasoline for your car. You can drive ten miles (round trip) to a gas station on the outskirts of town and save 12 cents per gallon on the price of gasoline. If gasoline costs $3.4 per gallon and your car gets 31 miles per gallon for i..

  Value at maturity if the interest is reinvested in deposit

A person places $5,000 in a certificate of deposit that matures in 20 years and pays annual interest rate of 3%. What will be the value at maturity if the interest is reinvested in the deposit? How much interest will accumulate after 20 years?

  Anticipated sales increase related to marketing campaign

Mama Italiano Sauce is in the process of preparing a production cost budget for May. Using this information, prepare a budget for May stating the total amount for the May budget. Assume the budget will increase to 23,500 jars of sauce reflecting anti..

  Use of discretionary sources of financing

Tulley Appliances Inc. projects next year's sales to be $21.25 million. Current sales are $17 million, based on current assets of $5.67 million and fixed assets of $8.50 million. Based on your projections, and assuming that the $200,000 expansion in ..

  Market value of the house-mortgage

A person has a net asset of $1 million, including a $300,000 net equity of a house (market value of the house – mortgage). Specifically, the house has a market value of $600,000 including $400,000 for the structure and $200,000 for the land, and a mo..

  What was the firms operating profit

A-Rod Fishing Supplies had sales of $2,840,000 and cost of goods sold of $1,760,000. Selling and administrative expenses represented 16 percent of sales. Depreciation was 8 percent of the total assets of $4,420,000. What was the firm’s operating prof..

  What would happen to interest rates and bond prices

One-year zero coupon treasury bonds are selling for £975.61 in the U.K. and for $963.86 in the U.S. Assume $1,000 face value in dollars for the U.S. bond and £1,000 face value for the U.K bond, and round interest rates to two decimal places, e.g. 2.5..

  The beta and the cost of equity be after recapitalization

Brown Inc. is considering changing its capital structure. Brown currently has $100 million in debt that carries a 6% interest rate. Its stock currently sells for $25 a share and there are 20 million shares outstanding. What is Brown’s unlevered beta?..

  What is the geometric average return

The common stock of Hillshire Farms has yielded 16.3 percent, 7.2 percent, 11.8 percent, -3.6 percent, and 9.7 percent over the past five years, respectively. What is the geometric average return?

  Create portfolio with an expected return

You have $21,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 10 percent and Stock Y with an expected return of 12.5 percent. If your goal is to create a portfolio with an expected return of 10.95 percent, how m..

  Writing a business plan to create financials as part of the

writing a business plan to create financials as part of the business plan.section 1 start-up expenses and

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd