Is There Justification for Shifting Some of the Cost of Capital

question 4

Multiple Choice

Is there justification for shifting some of the cost of capital projects to future taxpayers through issuing debt?

• A) Yes, future taxes should be increased.
• B) No, future taxes should be decreased.
• C) Yes, because they will benefit from these investments.
• D) No, because they will not benefit from these investments.
• E) No. Capital projects should never be financed by issuing debt.

---

Definitions:

Supervisory Salaries

Financial compensation awarded to employees who are in charge of overseeing and managing other workers.

Machine Hours

A measure of the amount of time a machine is operated, used as a basis for allocating factory overhead costs to products.

Standard Cost

A predetermined cost of manufacturing a product or performing a service, used as a benchmark to measure performance.

Direct Labor

The cost of the work performed by employees directly involved in manufacturing a product or providing a service.