For the case of an electric car project,the following costs should be treated as incremental costs when deciding whether to go ahead with the project EXCEPT:
A)the consequent reduction in sales of the company's existing gasoline models (i.e.,incidental effects).
B)interest payments on debt incurred to finance the project.
C)the value of tools that will be transferred to the project from the company's existing plants instead of being sold.
D)the expenditure on new plants and equipment.

Question

Quizplus · Accepted Answer

Interest payments on debt are considered financing costs and are not treated as incremental costs for project evaluation purposes. Incremental costs are those directly associated with the project itself.

For the Case of an Electric Car Project,the Following Costs