Holding all other variables constant, an increase in the cost of equipment at the beginning of the project would affect which of the following?
A)Initial Outlay
B)Incremental cash flows
C)Opportunity costs
D)Both a & b

Question

Quizplus · Accepted Answer

An increase in the cost of equipment at the beginning of a project would directly affect the Initial Outlay, as it represents the initial investment needed to start the project. It would also affect Incremental cash flows, as the higher initial cost would impact the project's cash flows, either by increasing expenses or requiring additional financing. Opportunity costs are not directly affected by the cost of equipment, as they represent benefits foregone by choosing one investment over another.

Holding All Other Variables Constant, an Increase in the Cost