When evaluating a new project, a firm should consider _____, as an incremental cash flow occurs only at the start of a project's life.
A) initial investment outlay
B) feasibility study cost
C) sunk costs
D) opportunity costs
E) externalities

Question

Quizplus · Accepted Answer

When evaluating a new project, one of the most important considerations is the initial investment outlay, which refers to the cash flow required to start the project. This includes costs such as equipment, materials, labor, and any other expenses associated with getting the project off the ground. Other factors such as feasibility study costs, sunk costs, opportunity costs, and externalities may also be important to consider, but they do not directly impact the cash flow of the project at its inception. Therefore, A is the best choice.

When Evaluating a New Project, a Firm Should Consider _____