Question

Which of the following would you NOT consider when making a capital budgeting​ decision?

A. the cost of a marketing study completed last year
B. the change in direct labor expense due to the purchase of a new machine
C. the additional taxes a firm would have to pay in the next year
D. the opportunity to lease out a warehouse instead of using it to house a new production line

Answer 1

A. the cost of a marketing study completed last year

Step-by-step explanation:

Capital budgeting is the process through which a business determines the viability of a potential investment project. Capital budgeting involves long term projects. It considers capital expenditure, whose returns in terms of cash flows will be received for at least one year.

Businesses can use the internal rate of return, payback period, or net present value techniques to help in decision making. These methods analyze and help the company understand the future risks and returns involved in a project.

The cost of a marketing study that concluded last year has no effects on expected cash flows. The techniques used in evaluating potencial projects use projected values and not past expenses.