You are using a capital budgeting method to assess the worth of your company's new information system.Which of the following costs would you include in measuring the cash outflow?
A) increased sales of products
B) hardware and software expenditures
C) labor expenditures
D) reduced costs in production and operation
E) both A and D
F) both B and C
G) A, B, C and D

Question

Quizplus · Accepted Answer

When measuring the cash outflow for a capital budgeting method, it is important to consider the costs that will require an immediate cash payment. Hardware and software expenditures and labor expenditures fall under this category as they are upfront costs that will require payment. Increased sales of products and reduced costs in production and operation are considered cash inflows as they bring in revenue and reduce future expenses, respectively. Therefore, they should not be included in measuring the cash outflow.

You Are Using a Capital Budgeting Method to Assess the Worth