Answered: Purposes for considering a capital…

Purposes for considering a capital project may include which of the following Cost reductions Growth projects Government required projects All of the above

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter12: Capital Investment Decisions

Section: Chapter Questions

Problem 17MCQ

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Purposes for considering a capital project may include which of the following
1. Cost reductions
2. Growth projects
3. Government required projects
4. All of the above

Expert Solution

Introduction:

The projects that are for the long term and are operated on a large scale are known as capital projects. It includes the development or enhancement of capital assets.

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Capital expenditure projects may be classified in all the following types EXCEPT ____. a. obligations to meet legal requirements b. cost reduction opportunities c. capital rationing d. growth opportunities
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Which of the following step is followed immediately after evaluating the proposals under capital budgeting process? a.Screening of available resources b.Final approval c.Fixing Property d.Identification of Various investments
Which of the following step is followed before evaluation of proposals under capital budgeting process? a. Final approval b. Screening of available resources c. Fixing Property d. Implementation
Please answer with full explaination The capital budgeting decision depends in part on the A. availability of funds. B. relationships among proposed projects C. risk associated with a particular project D. all of these answers are correct
Several proposed capital projects which are economically acceptable may have to be ranked due to constraints in financial resources. In ranking these projects, the least pertinent is this statement. A. A ranking procedure on the basis of quantitative criteria may be established by specifying a minimum desired rate of return, which rate is used in calculating the net present value of each project. B. In selecting the required rate of return, one may either calculate the organization’s cost of capital or use a rate generally acceptable in the industry. C. If the internal rate of return method is used in the capital rationing problem, the higher the rate, the better the project. D. If the net present value method is used, the profitability index is calculated to rank the projects. The lower the index, the better the project.
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When and under what conditions the cross over rate will be used will be an essential consideration in capital planning. Is it possible that it may cause an issue in the project selection process? Explain.
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