Question

Question Content AreaDecisions to install new equipment, replace old equipment, and purchase or construct a new building are examples of a.absorption cost analysis b.capital investment analysis c.sales mix analysis d.variable cost analysis

Answer 1

Decisions to install new equipment, replace old equipment, and purchase or construct a new building are examples of capital investment analysis.

What do you mean by capital investment analysis?

Companies and governments can anticipate the return on a long-term investment using the budgeting tool known as capital investment analysis. Long-term investments, including fixed assets like machinery, equipment, or real estate, are evaluated using capital investment analysis.

Capital investment analysis includes project appraisal that contains choices about how a corporation can manage its fixed assets. It entails making choices on the installation of new equipment vs the replacement of outdated equipment, the purchase or construction of a new building, the acceptance or rejection of a project, etc. To be approved and funded, these long-term investments must generate a return that exceeds the cost of raising capital.

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