Corporate Finance - Corporate Finance Section 1
- Option : B
- Explanation : New product or service would involve more uncertainties and complex decision making.
37. The post-audit stage of capital budgeting least likely includes:
- Option : A
- Explanation : Rescheduling and prioritizing projects is part of the planning stage of the capital budgeting process, not the post-audit.
- Option : C
- Explanation : Capital budgeting cash flows are based on opportunity costs. Accounting income is different from capital budgeting cash flows since non-cash items are included in it. Financing costs are not included in a cash flow calculation but are considered in the calculation of the discount rate.
- Option : B
- Explanation : The increase in energy drinks sales represents a positive externality that will increase the NPV of the project and should be included in the NPV analysis.
- Option : C
- Explanation : Including interest costs in the cash flows would result in double-counting the cost of debt as they are already taken into account when the cash flows are discounted at the appropriate cost of capital.
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