Q35. A company that sells ice create is evaluating an expansion of its production facilities to all company to also produce frozen yogurt. The expansion project is based on a marketing study that concluded producing frozen yogurt would increase the company's ice cream sales because of an increase in brand awareness. Should an analyst include the cash flows associated with the expected increase in ice cream sales is the calculation of the project's net present value (NPV)?

A. NO, because the projected increase in ice cream sales is an externality.

B. NO, because the projected increase is ice cream sales is an opportunity cost.

C.YES, because the project's NPV will be overstated. If the cash flows associated with the projected increase in ice cream sales are not included.

D. YES, because the project's NPV will be understated if the cash flows associated with the. Projected increase In ice errant sales are not included.

答案和详解如下：

Q35.   D   07 Modular level I , Vol. 3, PP.11-12      Study session 11.47.b

The increase in ice cream sales (externality) should he treated as an incremental cash flow and included in the analysis of the project's net present value.

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Q35.   D   07 Modular level I , Vol. 3, PP.11-12      Study session 11.47.b

The increase in ice cream sales (externality) should he treated as an incremental cash flow and included in the analysis of the project's net present value.

thx.