When evaluating a new project,the firm should consider all of the following factors except:
A) Changes in working capital attributable to the project.
B) Previous expenditures associated with a market test to determine the feasibility of the project,if the expenditures have been expensed for tax purposes.
C) The current market value of any equipment to be replaced.
D) The resulting difference in depreciation expense if the project involves replacement.
E) All of the above should be considered.

Question

Quizplus · Accepted Answer

All of the factors listed in options A, C, and D are important considerations when evaluating a new project. However, previous expenditures associated with a market test are sunk costs and should not be considered in the decision-making process. These costs cannot be recovered and are irrelevant to the future success of the project.

When Evaluating a New Project,the Firm Should Consider All of the Following