A Characteristic of Capital Budgeting Is

question 68

Multiple Choice

A characteristic of capital budgeting is

• A) a large amount of money is always involved.
• B) the internal rate of return must be less than the cost of capital.
• C) the internal rate of return must be greater than the cost of capital.
• D) the time horizon is at least five years.

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Definitions:

Net Operating Income

Income generated from regular business operations, excluding deductions for interest and taxes.

Manufacturing Overhead

All indirect costs associated with the manufacturing process, including costs related to factory equipment maintenance, factory management salaries, and utilities.

Period Cost

Expenses that are not directly tied to the production process and are charged to the period in which they occur, such as selling and administrative expenses.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a specific product and are significant in cost.