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Then match each of the examples below with important cash flow consideration - A project for a new holiday apprel company happen seasonality but are forecasted annually - Revenues or Costs that occur if and only if the project occurs - The Cardellas purchased tickets to Disneyland, but everyone woke up sick and no one wants to go. The tickets are said to be a... (I also hope this never happens). - A corporate jet was purchased 2 years ago. This could be utilized for a new project under consideration, but is considered a(n).... because it could be sold instead. - General Mills launched a new Pokemon Cereal so Andrew wanted to try it out instead of Lucky Charms. This is an example of a - Crayola launched a new color-stamping that only works on their ColorWonder paper. This new product is expected to also increase the sales of existing color-wonder paper. This is called a

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Answer:

1. A project for a new holiday apparel company happen seasonality but are forecasted annually - TIMING OF CASH FLOWS.

This relates to the timing of cash flows chosen by the company for analysis. Even though the project is seasonal, the cashflows are considered annual.

2. Revenues or Costs that occur if and only if the project occurs - INCREMETAL REVENUE.

Incremental revenue refers to the revenue that will come to a company if they further pursue a project.

3. The Cardellas purchased tickets to Disneyland, but everyone woke up sick and no one wants to go. The tickets are said to be a... (I also hope this never happens). - SUNK COSTS

Sunk costs are costs that have already been incurred and cannot be changed so do not matter in further decision making.

4. A corporate jet was purchased 2 years ago. This could be utilized for a new project under consideration, but is considered a(n).... because it could be sold instead. - OPPORTUNITY COST.

Opportunity costs are the other options that can be chosen as an alternative to the current action. This plane could be sold or used so it the options presented make it an opportunity cost.

5. General Mills launched a new Pokemon Cereal so Andrew wanted to try it out instead of Lucky Charms. This is an example of a - NEGATIVE EXTERNALITY CALLED CANNIBALIZATION.

Cannibalization occurs when a company releases a new product and sales of this new product leads to a reduction in the sales of the company's older products.

6. Crayola launched a new color-stamping that only works on their ColorWonder paper. This new product is expected to also increase the sales of existing color-wonder paper. This is called a POSITIVE EXTERNALITY.

A positive externality occurs in sales when the new product increases the sale of the older products as is the case here.

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