If a company already owns the land on which it plans to build a factory, the land should be treated as having no cost for purposes of evaluating the project because there is no cash outlay for the asset. Group of answer choices True False
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True or False: If a company already owns the land on which it plans to build a factory, the land should be treated as having no cost for purposes of evaluating the project because there is no cash outlay for the asset.
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- Why would the cash payback method understate the value of a project with a large residual value? What are the major disadvantages of the use of the net present value method of analyzing capital investment proposals? Give examples of qualitative factors that should be considered in a capital investment analysis related to acquiring automated factory equipment.If a firm must forgo a cash flow, not leasing an owned building for example, in order to accept some investment project, are the lost cash flows included in the analysis?Which of the statement is FALSE in financial decision making? A. Large size of business needs a large capital B. Large firms may obtain their fixed assets on the lease. C. Large firms would need to construct their own building and assemble their own plant
- True or False: If a project involves buying an asset, and if the company uses “accelerated depreciation” for tax purposes, after-tax cash flows for the project would be smaller in earlier years of the project than if the company used “straight line depreciation”, and therefore the project’s NPV would be smaller if it used accelerated depreciation, compared to the NPV if it used straight-line depreciation. Explain your answer.Your supervisor is on the companys capital investment decision team that is to decide on alternatives for the acquisition of a new computer system for the company. The supervisor says, The book value of the existing computer system for the firm that we are considering replacing is nothing but an accounting amount and as such is irrelevant in the capital expenditure analysis. Does this reasoning make sense? Why or why not?Which of the following statements is incorrect?(a) Economic decisions arc time invariant.(b) Time and risk arc the most important factors in any in vestment evaluation.(c) For a large-seal!! engineering project. engineers must consider the impact of the project on the company·s financial statemen ts.( d) One of the primary roles of engineers is to make capital expenditure decisions.
- Your supervisor is on the company’s capital investment decision team that is to decide on alternatives for the acquisition of a new computer system for the company. The supervisor says, “The book value of the existing computer system for the firm that we are considering replacing is nothing but an accounting amount and as such is irrelevant in the capital expenditure analysis.” Does this reasoning make sense2.Which of the following are sunk costs for deciding whether to accept or reject a project? i.Payments for maintenance of a factory that would need to be made if the project is accepted.ii.The salaries of employees that would need to be hired to execute the new project.iii.Payments that were made to an economist to generate economic forecasts that were used when deciding whether to accept or reject the project.iv.The additional tax expenses that are expected to result from the profits of the new project. a.iii and iv, but not i or iib.ii and iii, but not i or ivc.iii onlyd.iv onlyUnder IFRS, research must be expensed but some development expenditures may be capitalized. To capitalize development expenditures, firms must demonstrate several factors that include all of the following except: Multiple Choice technical feasibility. length of time the intangible asset is expected to provide benefits. ability to use or sell the asset. how the intangible asset will generate probable future economic benefits.
- In a replacement analysis, the market value of the currently owned asset a. does not impact the cash flows of the replacement asset(s) in the opportunity cost approach b. does not impact the cash flows of the current asset in the cash flow approach if the current asset is kept c. is treated as a salvage value for the current asset in the cash flow approach if the current asset is kept d. is added to the first cost of the replacement asset(s) in the opportunity cost approach.A company is most likely to:A. use a fair value model for some investment property and a cost model for other investment property.B. change from the fair value model when transactions on comparable properties becomeless frequent.C. change from the fair value model when the company transfers investment property toproperty, plant, and equipment.Jenny Rene, the CFO of Asor Products, Inc., has just completed an evaluation of a proposed capital expenditure for equipment that would expand the firm's manufacturing capacity. Using the traditional NPV methodology, she found the project unacceptable because: NPVtraditional=−$1,887<0 Before recommending rejection of the proposed project, she has decided to assess whether real options might be embedded in the firm's cash flows. Her evaluation uncovered three options and their probability: Option 1: Abandonment—The project could be abandoned at the end of 3 years, resulting in an addition to NPV of $1,040. Option 2: Growth—If the projected outcomes occurred, an opportunity to expand the firm's product offerings further would become available at the end of 4 years. Exercise of this option is estimated to add $2,820 to the project's NPV. Option 3: Timing—Certain phases of the proposed project could be delayed if market and competitive conditions caused the firm's…
