Day 1 Flashcards

1
Q

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

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

MCQ-04278

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2
Q

When are costs deemed to be relevant?

A

If they change as a result of selecting alternatives

MCQ-07103

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3
Q

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

A

Utilized in determining the tax cost or benefit

MCQ-08285

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4
Q

Equation: Depreciation Tax Shield

A

Cost of asset ÷ useful life × tax rate

MCQ-04280

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5
Q

What affects equipment replacement decisions?

A
  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

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6
Q

Rule: Relevant costs

A

Relevant costs are only those costs that differ among many alternatives

MCQ-03639

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