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Chapter 26: Q6RQ (page 1463)

List some common cash outflows from capital investments.

Short Answer

Expert verified

Acquisition cost, cash operating expense, and cash paid for maintenance, repair, and refurbishment.

Step by step solution

01

Meaning of Cash Outflows

The act of moving money out of business is known as a cash outflow, and it results in the miscellaneous liabilities that a company faces all along the course of its operations. Cash can leave the company in a number of ways, including installments of employees' wages, office leases, utility costs, and benefits to shareholders.

02

Listing some common cash outflows from capital investments

The initial investment (acquisition cost), cash operating expenses, and cash paid for refurbishment, repairs, and maintenance are all cash outflows from capital investment.

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Most popular questions from this chapter

Your grandfather would like to share some of his fortune with you. He offers to give you money under one of the following scenarios (you get to choose):

1. \(7,250 per year at the end of each of the next eight years

2. \)49,650 (lump sum) now

3. $98,650 (lump sum) eight years from now

Requirements

1. Calculate the present value of each scenario using an 8% discount rate. Which scenario yields the highest present value? Round to nearest whole dollar.

2. Would your preference change if you used a 10% discount rate?

David is entering high school and is determined to save money for college. David feels he can save $6,000 each year for the next four years from his part-time job. If David is able to invest at 7%, how much will he have when he starts college?

Explain the difference between capital assets, capital investments, and capital budgeting.

How is ARR calculated?

What is capital rationing?
See all solutions

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