All of the Following Are Typically Costs That Fail the Future

question 34

Multiple Choice

All of the following are typically costs that fail the future benefits test of long-lived operating assets except:

• A) costs related to research and development
• B) costs related to marketing
• C) costs related to brand-building activities
• D) costs of equipment used in production

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Definitions:

Future Value

The amount a present sum will grow into at a specified interest rate over a specified period of time.

Profitability Index

A calculation that determines the relationship between the costs and benefits of a proposed project through the ratio of present value of future cash flows over the initial investment.

Mutually Exclusive Projects

Projects in which the acceptance of one project will exclude the acceptance of the other projects due to constraints.

IRR

Internal Rate of Return; a financial metric used to evaluate the profitability of a potential investment, calculating the discount rate at which the net present value of costs and benefits equals zero.