MGMT 211 5801 F2017 Business Finance-FINAL Rowell Compuny pent 53 million two ye
ID: 2799606 • Letter: M
Question
MGMT 211 5801 F2017 Business Finance-FINAL Rowell Compuny pent 53 million two years apo to beild a plant for a new forwand with the project, seo the bailding is available for sale or for a new product Rowell owns the building free and clear-there is no mortgage a Since the building has been paid for it can be wsed by another project with no bI the building could be sold, them the after-tax proceeds that would be generated by c. This is = eurple of-enteralny, becase the very eutnceofthe building d Sincethe-was built in itscot isa cost and thus need not be product. It then decided sot so go itWhich of the ollowing statements is comect? additional cost. Therefore, it should not be reflected in the cash flows for any new project any such sale should be charged as a cost to any new peoject that would use i. affects the cash flows for any new project that Rowell mighe consider considered whrn new projects are heing evaluated even if it would be used by those new projects 0 What will heavy use of off-balance shoet lease fimancing send to do? a. Make a company appear riskier that it actually is becase its stated debe ratio will be b increased Make the company appear less risky than it actualy is because its stated debt ratio will appear lower Affect a company's cash fnow but not its degree of rs d Affect the lessee's cash flows bat only die to tax effiectsExplanation / Answer
19)
While evaluating cash flows all the relevant cash flows must be considered. If building is not used, it can be sold. So it has relevant cash flows as sale proceeeds.
Hence, correct option is (b).
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