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.

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.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5Q: Your supervisor is on the companys capital investment decision team that is to decide on...

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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?
Why does a company evaluate both the money allocated to a project and the time allocated to the project?
3) Which of the following statements correctly relates to project appraisal? A) Changes in working capital as a result of implementing a project should be included in the project appraisal. B) The costs of surveys and feasibility studies incurred prior to the decision to implement a project should be included in the project appraisal, as they are a cost of the project. C) The effect of a new project on other parts of a business is irrelevant when trying to decide whether to go ahead with the new project. D) Depreciation is a legitimate cost of a project and should be included in a project appraisal.
________ of a project are those that will occur whether a company accepts or rejects a project. a. Opportunity costs b. Erosion costs c. Sunk costs d. Working capital costs
Which ot the following statements is true? a. IFRS requires firms to expense immediately all internal expenditures for R&D costs. b. Under IFRS, the product development portion of R&D is capitalized. c. U.S. standard setters require R&D costs to be expensed because of the uncertainty in judging their future revenue-generating potential. d. GAAP required disclosure of firms’ R&D expenditures assits the investor well. This is particularly true for firms with large R&D expenditures, such as technology firms. Which of the following statements is true? (Select one or more) a. For some transactions U.S. GAAP requires that value changes are recognized on the balance sheet and the income statement when they occur, even if not realized. b. U.S. GAAP allows firms to revalue upward the values of assets whose fair values have increased. c. A write down is necessary if the fair market value (FMV) of equipment is less than the carrying value currently on the books…
While the NPV is proven to be the correct way of analyzing projects, it seems that its accuracy is enhanced by use of the IRR to determine how sensitive the NPV is to the cost of capital. Given this apparent reality that both tools contribute critical information to final business decisions, shouldn’t both the NPV and IRR be included in every analysis?
Why does a company evaluate both the money allocated to a project and the time allocated to the project? How do these evaluations help with planning and business decisions? Give some examples.
ABC Construction Company is conducting an industry analysis of project management practices in the construction industry. As a financial analyst, you are tasked with assessing the financial implications of various project management approaches used by construction firms. a) Explain the concept of Earned Value Management (EVM) and its significance in construction project cost control. b) Compare and contrast the traditional Cost Plus Fixed Fee (CPFF) contract and the Lump Sum Fixed Price (LSFP) contract in terms of risk allocation and financial outcomes for both the construction firm and the client. c) Evaluate the impact of working capital management on construction project profitability and cash flow, considering the unique challenges and cash flow patterns in the construction industry.
The need for working capital management vary from industry to industry, and they can even vary amongsimilar companies. This is due to several factors, including differences in collection and payment policies, the timing of asset purchases, the likelihood of acompany writing off some of its past-due accountsreceivable, and in some instances, capital-raising effortsa company is undertaking. Proper management ofworking capital is essential to a company’sfundamentalfinancial health and operational success as a business.Critically analyses this statement with practical example?
Select the incorrect statement regarding postaudits of capital investment decisions.A. The postaudit helps management determine whether a project that had been accepted should have been rejected.B. The goal of a postaudit is to provide feedback that can be used to improve the accuracy of future capital investment decisions.C. A postaudit is only necessary for a capital investment selected using a technique that does not consider the time value of money.D. A postaudit should be conducted at the end of the project.
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.
Which of the following research and development and software development costs should be expensed? A) Costs incurred to modify or improve an existing profitable product. B) Software costs before technological feasibility C) Research and development purchased as part of an acquisition. D) Salary costs related to discovering a new product. E) Software development costs incurred after the software works and there is a viable market Which of the following may indicate impairment may have occurred? A) Cash discounts are offered on the products the company sells. B) The business environment is stable. C) A high gross profit percentage on products sold. D) A significant decrease in the useful life of the asset.