Question

Which of the following is TRUE?
Select one:
a. A capital expenditure is an outlay of funds invested only in fixed assets that is expected to produce benefits over a period of time less than one year.
b. An outlay for advertising and management consulting is considered to be a fixed asset expenditure.
c. The primary motive for capital expenditures is to refurbish fixed assets.
d. The basic motives for capital expenditures are to expand operations, to replace or renew fixed assets, or to obtain some other, less tangible benefit over a long period.

Which of the following basic variables must be considered in determining the initial investment associated with a capital expenditure?
Select one:
a. changes in net working capital
b. cash flows generated by the new investment
c. profits on the sale of an existing asset
d. incremental annual savings produced by the new asset

Please Solve As soon as
Thank's
Abdul-Rahim Taysir

Answer 1

Solution

1)

Option D

The basic motives for capital expenditures are to expand operations, to replace or renew fixed assets, or to obtain some other, less tangible benefit over a long period.

Other options are incorrect as Capital expenditures can be spent on long period assets also and not only for advertising and condulting as they are not fixed expenditures

2)

One of the best outcomes to see is already whether the invested has provided any benefits for us. Else, investing more in the same is baseless and would not be considered as a useful investment

Hence option C