In determining the price or initial cash outlay of a project, it is necessary to consider the following items:
A) initial outlays for land, buildings and equipment.
B) developmental costs for the undertaking itself and the product it is intended to produce.
C) the cost to the firm of any increase in working capital requirements attributable to the project.
D) if applicable, the after tax salvage value of any existing equipment.
E) all of the above.

Question

Quizplus · Accepted Answer

All of the options (A) through (D) are necessary considerations when determining the price or initial cash outlay of a project. Initial outlays for land, buildings, and equipment are the tangible assets required to start the project, developmental costs for the undertaking and the product are necessary to ensure the project's success, the cost of any increase in working capital requirements is a consideration for financing the project, and the after-tax salvage value of existing equipment can potentially offset the total project cost.

In Determining the Price or Initial Cash Outlay of a Project