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75. A company plans to issue

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72. An analyst gathers the following information about the cost and availability of raising various amounts of new debt and equity capital for a company:

Amount of new debt (in millions)	Cost of debt (after tax)	Amount of new equity (in millions)	Cost of equity
≤

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72. An analyst gathers the following information about the cost and availability of raising various amounts of new debt and equity capital for a company:

Amount of new debt (in millions)	Cost of debt (after tax)	Amount of new equity (in millions)	Cost of equity
≤

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69. Which of the following is least likely classified as an opportunity cost?

A. The cash savings related to adopting a new production process.
B. The cash flows generated by an old machine that is to be replaced.
C. The market value of vacant land to be used for a distribution center.

Answer: A
“Capital Budgeting,” John D. Stowe, CFA, and Jacques R. Gagné, CFA
2009 Modular Level I, Volume 4, pp. 8-10
Study Session 11-44-b
Discuss the basic principles of capital budgeting, including the choice of the proper cash flows and determining the proper discount rate.
The cash savings related to adopting a new production process is an incremental cash flow, not an opportunity cost.

70. A capital project with a net present value (NPV) of $23.29 has the following cash flows:

Year	0	1	2	3	4	5
Cash flow (