- CFA Exams
- CFA Exam: Level II 2021
- Study Session 7. Corporate Finance (1)
- Reading 19. Capital Budgeting
- Subject 1. Cash flow projections
CFA Practice Question
Suppose we are investing in a new project with an outlay of $200,000 and we sell off existing assets that the project replaces for $50,000, the incremental outlay is:
B. $200,000.
C. $150,000.
A. $250,000.
B. $200,000.
C. $150,000.
Correct Answer: C
The cash flows relevant to an investing decision are the incremental cash flows: the cash flows the company realizes with the investment compared to the cash flows the company would realize without the investment.
User Contributed Comments 2
| User | Comment |
|---|---|
| ssradja | It is not counting in the tax impact due to gain or loss from the sale of the old equipment |
| myron | if it's not mentioned you should not consider it, otherwise there would be too much uncertainties. |