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5 Cards in this Set
- Front
- Back
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What are cash outflows? |
Expenditures on fixed assets, including shipping/installation. Expenditures on working capital. |
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What is meant by the idea, think incrementally? |
Only consider incremental costs, e.g. costs resulting from project - not costs incurred prior or costs that would be incurred regardless. |
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What is meant by the idea, ignore sunk costs? |
Costs already incurred prior to the project should not be allocated to the project. Sunk costs are ancient history |
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What are opportunity costs? |
Cost of chosen act is most valuable forsaken alternative opportunity. E.g. use of assets that do not have direct price, like machines that the firm already owns, have an opp. cost equal to the profit foregone on the best alt. production opp. |
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What are externalities? |
Benefits granted to or costs borne by others, and not the firm, and therefore is not priced in project. |
