Match Each One of the Examples Below with One of the Stages

question 18

Essay

Match each one of the examples below with one of the stages of the capital budgeting decision model.
Stages:
1. Identify Projects
2. Obtain Information
3. Make Predictions
4. Make Decisions by Choosing Among Alternatives
5. Implement the Decision, Evaluate Performance, and Learn

___a. Issuing corporate stock for the funds to purchase new equipment
___b. Learning how to effectively operate Machine \#8 only takes 15 minutes
___c. The need to reduce the costs to process the vegetables used in producing goulash
___d. Monitoring the costs to operate a new machine
___e. Percentage of defective merchandise considered too high
___f. Will introducing the new product substantially upgrade our image as a producer of quality products?
___g. Estimating yearly cash flows and setting investment bud gets accordingly using a 12-year planuning horizon.
___h. Use of the internal rate of return for eachalternative
___i. Tracking realized cash flows and comparing against estimated numbers.

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Definitions:

Economic Profits

The surplus remaining after subtracting total costs from total revenues, including both explicit and implicit costs, indicating the profitability of an enterprise beyond basic financial gain.

Entry Barriers

Entry barriers are obstacles that make it difficult for new firms to enter a market, often protecting existing firms from competition.

Excess Capacity Problem

A situation where a firm has more production capacity than needed to meet demand, leading to inefficient use of resources.

Monopolistic Competition

An economic setup in which several companies offer products that are closely related but not exactly the same, granting them a certain level of influence over the market.