You Are Using a Capital Budgeting Method to Assess the Worth

question 74

Multiple Choice

You are using a capital budgeting method to assess the worth of your company's new information system.Which of the following costs would you include in measuring the cash outflow?

• A)increased sales of products
• B)hardware and software expenditures
• C)labor expenditures
• D)reduced costs in production and operation
• E)both B and C

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Definitions:

Effective-Interest Method

A method of calculating the amortized cost of a bond and of interest expense over the bond's life, reflecting a constant rate of interest.

Amortization

The process of gradually writing off the initial cost of an intangible asset over a period.

Market Rate

The interest rate available in the marketplace for similar transactions.