The basic variables that must be considered in determining the initial investment associated with a capital expenditure are all of the following EXCEPT
A) proceeds from the sale of the existing asset.
B) taxes on the sale of an existing asset.
C) incremental annual savings produced by the new asset.
D) cost of the new asset.

Question

Quizplus · Accepted Answer

Incremental annual savings produced by the new asset are considered in the evaluation of the project's cash flows, not in determining the initial investment.

The Basic Variables That Must Be Considered in Determining the Initial