Question

In the cash flow information for the Ping Kings project, Ping spent $300,000 for research and development of the golf clubs, Ping's tax rate is 40%. How much of this cost should be included in the initial (t 0) cash flow for this project?

a, $120,000
b. $180,000
c. $300,000
d. $0

Answer 1

B is how much of the cost should be included in the initial (t 0) cash flow for the project

Answer 2

The amount of the cost of research and development costs that should be included in the initial cashflow of the Project to Ping King Project is d. $0.

What amount of research and development should be included?

According to U.S. GAAP, Research and Development costs are considered sunk costs and should not be capitalized.

This means that in computing the initial cashflow for the project, a total of $0 should be listed as initial cashflow.

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