Pick one of the questions below. Explain your response in paragraph or two.
1. How do capital expenditures differ from ordinary expenditures?
2. What effects can capital-budgeting decisions have on a company?
3. What effect does depreciation have on cash flow?
4. Give an example of an out-of-pocket cost and a sunk cost by describing a situation in which both are encountered.
5. A machine is being considered for purchase. The salesperson attempting to sell the machine says that it will pay for itself in five years. What is meant by this statement?
6. Discuss the limitations of the payback period method.
7. What is the profitability index, and of what value is it?
8. What is the time-adjusted rate of return on a capital investment?
9. What role does the cost of capital play in the time-adjusted rate of return method and in the net present value method?
"Capital Budgeting Essay Questions" by Gary E. Ford, ACCT 102 Principles of Accounting, Tompkins Cortland Community College is licensed under CC BY 4.0
1. How do capital expenditures differ from ordinary expenditures?
2. What effects can capital-budgeting decisions have on a company?
3. What effect does depreciation have on cash flow?
4. Give an example of an out-of-pocket cost and a sunk cost by describing a situation in which both are encountered.
5. A machine is being considered for purchase. The salesperson attempting to sell the machine says that it will pay for itself in five years. What is meant by this statement?
6. Discuss the limitations of the payback period method.
7. What is the profitability index, and of what value is it?
8. What is the time-adjusted rate of return on a capital investment?
9. What role does the cost of capital play in the time-adjusted rate of return method and in the net present value method?
"Capital Budgeting Essay Questions" by Gary E. Ford, ACCT 102 Principles of Accounting, Tompkins Cortland Community College is licensed under CC BY 4.0