Day 1 Flashcards
1
Q
Name a non-financial or qualitative factor in Capital budgeting?
A
- Increase in manufacturing flexibility
- Improved product delivery and service
- Reduction in new product development time
MCQ-04278
2
Q
When are costs deemed to be relevant?
A
If they change as a result of selecting alternatives
MCQ-07103
3
Q
When estimating cash flow for use in Capital budgeting, depreciation is:
A
Utilized in determining the tax cost or benefit
MCQ-08285
4
Q
Equation: Depreciation Tax Shield
A
Cost of asset ÷ useful life × tax rate
MCQ-04280
5
Q
What affects equipment replacement decisions?
A
- Current disposal price of old equipment
- Cost of the new equipment
- Operating cost of the new equipment
Note: original FMV of old equipment = sunk costs
MCQ-03283
6
Q
Rule: Relevant costs
A
Relevant costs are only those costs that differ among many alternatives
MCQ-03639