Capital Budgeting

Capital Budgeting

Question 1

The answer would be No, as the cost associated with the marketing test is a part or would be termed as sunk cost. Sunk costs represent costs that have been associated by expenses in the past. This is, for example, the cost of an investment in the run-through market analysis or for already the consumed resources of a project. Sunk costs are in the nature of fixed costs, but not vice versa, all fixed costs sunk costs. The essential characteristic of sunk costs is its irreversibility. Thus, a developed software for a company to control a specific manufacturing process in switching production are sunk costs that cannot be recovered, in contrast, however, can continue to sell a business property and therefore does not quite to the sunk costs. Sunk Costs play when deciding on a future investment not matter. You will not go into the calculation of net present value to analyze the profitability of an investment. Turns out that an investment has failed, this should be assessed regardless of the already incurred costs. Then remains to be seen what alternative uses for the water bound in the investment capital (e.g., buildings, etc.) exist.

Sunk costs quantify the cost value of the resource consumption of an investment or a project there. For the decision on the continuation of a capital project there but these are not relevant for the decision because the cost quasi already “eaten” is. The sunk costs plus the completion of the project costs are the total project cost. Sunk costs are fixed costs of a plant that were set in the past and even in the decommissioning of the plant continue to exist for a long time. Sunk costs are fixed costs of a plant that were set in the past and even in the decommissioning of the plant continue to exist for a long time. Fixed costs of market entry, which are depreciated neither at market exit, nor by sale or alternative use of the acquired assets and equipment for the Company can be recovered. The sunk costs include expenditures for production-specific durable capital goods (for example, blast furnaces for steel production), but also for product differentiation strategies, or market research. Sunk costs make for potential newcomers constitute a barrier to entry, market exit as later, in response to such aggressive strategy n the established business , loss in the amount of e unamortized investment has s result.

Question 2

Working capital (also called working capital, capital, capital turnover, working capital), which is the excess of assets over the short-term current liabilities, is a measure of the ability of a company to continue with the normal development of their activities in the short term. Subtracting estimated to total short-term assets, total current liabilities. It is defined as the ability of a company to carry out their normal activities in the short term. This can be calculated as leftover assets relative to current liabilities. Working capital is useful for determining the asset balance of every business organization. It is an essential tool when ...