Boysone Plc Has Constructed a Piece of Complex Equipment to Be

question 13

Multiple Choice

Boysone Plc has constructed a piece of complex equipment to be used in its updated production facility.The construction took a year to complete and although the equipment was ready for use,the rest of the facility was not completed and so the equipment was not put into use for another 6 months; that is,on 1 July 2013.The cost of constructing the equipment was £70 000 and it is expected to have an operating life of 12 years.It is very likely to be technologically obsolete in 10 years.It is expected to have a scrap value at the end of its life (at whatever time) of £5000.The expected pattern of benefits derived from the equipment is uniform throughout its life.What is the amount of depreciation to be charged in the year ending 31 December 2013 (rounded to the nearest pound) ?

• A)£3500
• B)£5417
• C)£3250
• D)£6500

Recognize the significance of options in capital budgeting including expansion, abandonment, and timing options.

Distinguish between different types of analysis including scenario, sensitivity, and simulation analyses in evaluating project variables.

Understand the concept of the cost of capital and its impact on investment returns and valuation.

Identify the components of capital and their respective costs.

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Definitions:

Family Life Cycle

The distinct family-related phases that an individual progresses through over the course of his or her life.

Family-related Phases

The different stages or cycles a family goes through, which can influence consumer behavior and marketing strategies.

Individual

A single human being considered separately from a society or community.

Values

A consumer’s belief that specific behaviors are socially or personally preferable to other behaviors.