Question 1

A capital budget spans only a one-year period.

Accepted Answer

A capital budget typically spans multiple years (usually three to five years) and outlines the company's planned investments in long-term assets such as property, equipment, and technology.

Question 2

What stage of the capital budgeting process involves choosing the projects for implementation?

Accepted Answer

The stage of making decisions by choosing among alternatives involves selecting the projects that will be implemented based on various criteria such as financial feasibility, strategic alignment, and risk assessment. This stage follows the evaluation of each possible course of action and precedes the management-control stage where the selected projects are executed and monitored for performance. The identification of the problem stage refers to the initial stage in which a need or opportunity for investment is recognized.

Question 3

Explain capital budgeting and briefly discuss each of the five stages of a capital budgeting project.
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_____________________________________________________________________________________________

Accepted Answer

Capital budgeting is long-run planning for investment projects that usually have a life that is greater than one year.
Stage 1 of a capital budgeting project is the identify projects stage in which a firm determines which types of capital investments are necessary to accomplish organisation objectives and strategies.
Stage 2 is the obtain information stage in which a firm gathers information from all parts of the value chain to analyse alternative projects.
Stage 3 is the make predictions stage in which the firm forecasts all potential cash flows attributable to the alternative projects.
Stage 4 is the make decisions by choosing among alternatives stage in which the firm determines which investment yields the greatest benefit and the least cost to the organisation.
Stage 5 is the implement the decision,evaluate performance,and learn stage that is further separated into two sub stages:(1)obtain funding and make the investments selected in the stage 4 process,and (2)track the realised cash flows,compare against the forecast numbers and revise plans if necessary.

Question 4

The following are included in the formal financial analysis of a capital budgeting program except for:

Accepted Answer

The formal financial analysis of a capital budgeting program focuses on financial aspects such as cash flow, payback period, internal rate of return, and net present value. Safety of employees and quality of output are not typically included in this analysis. However, they may be considered as non-financial factors in the overall decision-making process.

Question 5

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 shares for the funds to purchase new equipment
b.Learning that 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 is considered too high
f.Will introducing the new product substantially upgrade our image as a producer of quality products?
g.Research indicates there are five machines on the market capable of producing our product at a competitive cost
h.Use of the internal rate of return for each alternative

Accepted Answer

The answer of Match each one of the examples below...

Question 6

During which stage of the capital budgeting process does marketing query the potential revenue numbers?

Accepted Answer

Collecting information is the stage of capital budgeting where all relevant data is gathered. Marketing queries the potential revenue numbers during this stage.

Question 7

Capital budgeting focuses on projects over their entire lives to consider all the cash flows or cash savings from investing in a single project.

Accepted Answer

Capital budgeting involves analyzing and evaluating all of the costs and potential cash inflows and outflows of a project over its entire life cycle in order to determine whether or not it is a worthwhile investment. Therefore, the statement is true.

Question 8

The stage of the capital-budgeting process in which projects get underway and performance is monitored is the:

Accepted Answer

The implement the decision, evaluate performance, and learn stage is when the chosen project is put into action and its performance is monitored to ensure that it meets the expected outcomes. This stage involves tracking progress, evaluating results, and making adjustments as needed, so as to learn from the project and improve future decisions.

Question 9

The 'identify the problem' stage of capital budgeting gathers information from all parts of the value chain to evaluate alternative projects.

Accepted Answer

The 'identify the problem' stage of capital budgeting is primarily focused on recognizing the need for a project or investment, rather than gathering information from all parts of the value chain to evaluate alternative projects. That step comes later in the process.

Question 10

The 'determine possible courses of action and consider the consequences of each' stage of the capital budgeting process consists of forecasting all potential net profit additions that are attributable to the alternative projects.

Accepted Answer

This stage involves evaluating various project alternatives and their potential impacts on the company's financial health, including but not limited to net profit additions. It encompasses a broader analysis of costs, benefits, risks, and strategic fit beyond just forecasting net profits.

Question 11

During which stage of the capital budgeting process does a firm obtain funding for the project?

Accepted Answer

Obtaining funding for the project is typically part of the implementation stage, where the chosen course of action is put into action and the necessary resources, including funding, are acquired to carry out the project. The other stages involve gathering information, evaluating alternatives, and monitoring performance.

Question 12

______________________ involves significant financial investments in projects to develop new products,expand production capacity or remodel current production facilities.

Accepted Answer

Capital budgeting involves making long-term investment decisions that require significant financial investments. This can include projects to develop new products, expand production capacity, or remodel existing production facilities. Working capital refers to the day-to-day operating expenses of a business, while project-cost budgeting is a specific type of budgeting used to allocate resources for a specific project. Master budgeting is an overall plan for a company's finances and operations, which can include capital budgeting decisions.

Question 13

Explain why a corporation's customer base is considered an intangible asset.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The answer of Explain why a corporation's customer base is...

Question 14

The 'evaluate each possible course of action and select the best one' stage of the capital budgeting process consists of determining which investment yields the greatest benefit and the least cost to the organisation.

Accepted Answer

This is a correct statement about the evaluation stage of the capital budgeting process.

Question 15

The 'collect relevant information' stage of capital budgeting gathers information from all parts of the value chain to evaluate alternative projects.

Accepted Answer

The 'collect relevant information' stage of capital budgeting does involve gathering information from all parts of the value chain to evaluate alternative projects.

Question 16

During which stage of the capital budgeting process is the type of capital expenditure project identified as being necessary to accomplish organisation objectives?

Accepted Answer

The identification of the type of capital expenditure project that is necessary to accomplish organizational objectives is part of the first stage of the capital budgeting process, which is the identification of the problem. This stage involves identifying the need for investment and the opportunities available to the organization for achieving its objectives. The other stages include collecting information, making decisions by choosing among alternatives, and implementing the decision.

Question 17

What are the two factors capital budgeting emphasises?

Accepted Answer

Capital budgeting primarily emphasises quantitative and financial factors. This includes factors such as estimating cash flows, calculating return on investment, and determining the net present value of a project. While qualitative and non-financial factors may also play a role in the decision-making process, they are typically secondary to the financial considerations.

Question 18

The very last step in the final stage in the capital budgeting process is to make the investment identified previously.

Accepted Answer

The very last step in the final stage of the capital budgeting process is actually to conduct a post-implementation review of the investment to assess its performance and to learn lessons for future projects. Making the investment occurs earlier in the process.

Question 19

The stage of the capital budgeting process that considers the expected costs and the expected benefits of alternative capital investments is the:

Accepted Answer

The stage of evaluating each possible course of action considers the expected costs and benefits of alternative capital investments. This stage is critical as it helps management to identify the most financially feasible investment options.

Question 20

What is the accounting system that corresponds to the project dimension in capital budgeting called?

Accepted Answer

The accounting system that corresponds to the project dimension in capital budgeting is called life-cycle budgeting and costing. This system allows for the consideration of all costs and revenues over the entire life of the project, helping to better assess its long-term profitability. The other options listed (accrual accounting rate-of-return, net present value method, and internal rate-of-return) are all methods used in capital budgeting, but do not specifically relate to the project dimension accounting system.

Quiz 18: Capital Budgeting and Cost Analysis

A capital budget spans only a one-year period.

What stage of the capital budgeting process involves choosing the projects for implementation?

Explain capital budgeting and briefly discuss each of the five stages of a capital budgeting project. _ _

The following are included in the formal financial analysis of a capital budgeting program except for:

During which stage of the capital budgeting process does marketing query the potential revenue numbers?

Capital budgeting focuses on projects over their entire lives to consider all the cash flows or cash savings from investing in a single project.

The stage of the capital-budgeting process in which projects get underway and performance is monitored is the:

The 'identify the problem' stage of capital budgeting gathers information from all parts of the value chain to evaluate alternative projects.

The 'determine possible courses of action and consider the consequences of each' stage of the capital budgeting process consists of forecasting all potential net profit additions that are attributable to the alternative projects.

During which stage of the capital budgeting process does a firm obtain funding for the project?

______________________ involves significant financial investments in projects to develop new products,expand production capacity or remodel current production facilities.

Explain why a corporation's customer base is considered an intangible asset. _ _

The 'evaluate each possible course of action and select the best one' stage of the capital budgeting process consists of determining which investment yields the greatest benefit and the least cost to the organisation.

The 'collect relevant information' stage of capital budgeting gathers information from all parts of the value chain to evaluate alternative projects.

During which stage of the capital budgeting process is the type of capital expenditure project identified as being necessary to accomplish organisation objectives?

What are the two factors capital budgeting emphasises?

The very last step in the final stage in the capital budgeting process is to make the investment identified previously.

The stage of the capital budgeting process that considers the expected costs and the expected benefits of alternative capital investments is the:

What is the accounting system that corresponds to the project dimension in capital budgeting called?

Quiz 18: Capital Budgeting and Cost Analysis

A capital budget spans only a one-year period.

What stage of the capital budgeting process involves choosing the projects for implementation?

Explain capital budgeting and briefly discuss each of the five stages of a capital budgeting project. _____________________________________________________________________________________________ _____________________________________________________________________________________________

The following are included in the formal financial analysis of a capital budgeting program except for:

During which stage of the capital budgeting process does marketing query the potential revenue numbers?

Capital budgeting focuses on projects over their entire lives to consider all the cash flows or cash savings from investing in a single project.

The stage of the capital-budgeting process in which projects get underway and performance is monitored is the:

The 'identify the problem' stage of capital budgeting gathers information from all parts of the value chain to evaluate alternative projects.

The 'determine possible courses of action and consider the consequences of each' stage of the capital budgeting process consists of forecasting all potential net profit additions that are attributable to the alternative projects.

During which stage of the capital budgeting process does a firm obtain funding for the project?

______________________ involves significant financial investments in projects to develop new products,expand production capacity or remodel current production facilities.

Explain why a corporation's customer base is considered an intangible asset. _____________________________________________________________________________________________ _____________________________________________________________________________________________

The 'evaluate each possible course of action and select the best one' stage of the capital budgeting process consists of determining which investment yields the greatest benefit and the least cost to the organisation.

The 'collect relevant information' stage of capital budgeting gathers information from all parts of the value chain to evaluate alternative projects.

During which stage of the capital budgeting process is the type of capital expenditure project identified as being necessary to accomplish organisation objectives?

What are the two factors capital budgeting emphasises?

The very last step in the final stage in the capital budgeting process is to make the investment identified previously.

The stage of the capital budgeting process that considers the expected costs and the expected benefits of alternative capital investments is the:

What is the accounting system that corresponds to the project dimension in capital budgeting called?

Explain capital budgeting and briefly discuss each of the five stages of a capital budgeting project. _ _

Explain why a corporation's customer base is considered an intangible asset. _ _