CFA Practice Question

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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:

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.
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