Ch7. Capital Budgeting

Question 1

an assets that will be useful to a business over a long period of time such as: land, building, equipment, etc,

Answer 1

capital assets

Question 2

land, building, equipment, etc., which is owned by a company and which is used to produce income for the company

Answer 2

capital assets

Question 3

the process of identifying, evaluating, planning and financing capital investment project of an organization

Answer 3

capital budgeting

Question 4

used by companies to evaluate major projects and investments, such as new plants or equipment

Answer 4

capital budgeting

Question 5

judgement regarding the method of raising capital to fund the investment

Answer 5

financing decisions

Question 6

judgement about which asset to acquire to achieve the company’s objectives

Answer 6

investment decisions

Question 7

capital budgeting involves

Answer 7

financing decisions
investment decisions

Question 8

characteristics of capital investment decisions

Answer 8

1. decisions usually require large commitments or resources.
2. involves long term commitments
3. more difficult to reverse than short term decisions
4. involves much risk and uncertainty

Question 9

common types of capital projects

Answer 9

1. replacement
2. improvement
3. expansion