Which of the following is not considered a relevant cash flow when deter- mining incremental cash flows for a new project? a) Shipping and installation costs associated with the new project. b) The use of floor space that is currently unused but available for any new project. c)The cost of a consultant\'s report concerning the feasibility of the project that was completed (and paid for) in the previous year. d) An increase in current assets (e.g., inventories) that would result if the project is undertaken. e) Revenues from an existing service that would be lost if the new project was initiated. Solution The cost of a consultant\'s report concerning the feasibility of the project that was completed (and paid for) in the previous year. This is a sunk cost and can not be recovered in any manner by opting or not opting the project. This is not a capital cost or annual operating cost, so it would not be included. .

1. Which of the following is not considered a relevant cash flow when deter- mining incremental
cash flows for a new project?
a) Shipping and installation costs associated with the new project.
b) The use of floor space that is currently unused but available for any new project.
c)The cost of a consultant's report concerning the feasibility of the project that was completed
(and paid for) in the previous year.
d) An increase in current assets (e.g., inventories) that would result if the project is undertaken.
e) Revenues from an existing service that would be lost if the new project was initiated.
Solution
The cost of a consultant's report concerning the feasibility of the project that was completed
(and paid for) in the previous year.
This is a sunk cost and can not be recovered in any manner by opting or not opting the project.
This is not a capital cost or annual operating cost, so it would not be included.