You Are Using a Capital Budgeting Method to Assess the Worth

question 69

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 A and D
• F) both B and C
• G) A, B, C and D

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Definitions:

Dividend Growth Model

A valuation method that estimates the price of a company’s stock based on the dividend per share and the dividend growth rate.

Constant Rate

A fixed rate, without variation or fluctuation over time.

Dividends

Dividends are payments made by a corporation to its shareholder members, usually derived from the company's profits.

Constant Growth Model

A method to value a stock by assuming that dividends grow at a constant rate indefinitely.