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Cora Lewis is performing an analysis to determine if her firm should invest in new equipment to produce a product recently developed by her firm. The option would be to abandon the product. She uses the net present value (NPV) method and discounts at the firm’s cost of capital. Cora is contemplating how to handle the following items:
I. The book value of warehouse space currently used by another division.
II. Interest payments on debt to finance the equipment.
III. Increased levels of accounts payable and inventory.
IV. R&D spent in prior years and treated as a deferred asset for book and tax purposes.
Which of the above items are relevant for Cora to consider in determining the cash flows for her NPV calculation?