Day 1

Question 1

Name a non-financial or qualitative factor in Capital budgeting?

Answer 1

1. Increase in manufacturing flexibility
2. Improved product delivery and service
3. Reduction in new product development time

MCQ-04278

Question 2

When are costs deemed to be relevant?

Answer 2

If they change as a result of selecting alternatives

MCQ-07103

Question 3

When estimating cash flow for use in Capital budgeting, depreciation is:

Answer 3

Utilized in determining the tax cost or benefit

MCQ-08285

Question 4

Equation: Depreciation Tax Shield

Answer 4

Cost of asset ÷ useful life × tax rate

MCQ-04280

Question 5

What affects equipment replacement decisions?

Answer 5

1. Current disposal price of old equipment
2. Cost of the new equipment
3. Operating cost of the new equipment

Note: original FMV of old equipment = sunk costs

MCQ-03283

Question 6

Rule: Relevant costs

Answer 6

Relevant costs are only those costs that differ among many alternatives

MCQ-03639