Exam 10: Making Capital Investment Decisions

The difference between a company's future cash flows if it accepts a project and the company's future cash flows if it does not accept the project is referred to as the project's:

The stand-alone principle advocates that project analysis should be based solely on which one of the following costs?

A project requires the purchase of $587,000 of equipment that will be depreciated straight-line to a zero book value over the four-year life of the project. The equipment can be scraped at the end of the project for 33 percent of its original cost. Annual sales from this project are estimated at $625,000 with cash expenses of $487,000. Net working capital equal to 12 percent of sales will be required to support the project. The required return is 13 percent and the tax rate is 21 percent. What is the cash flow in Year 2 of the project? Ignore bonus depreciation.

Which one of the following would make a mutually exclusive project unacceptable?