COST ACCOUNTING
CAPITAL BUDGETING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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cash flows arising from a particular investment decision
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the amount by which a firmʹs earnings are expected to change as a result of an investmentdecision
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the earnings arising from all projects that a company plans to undertake in a fixed timespan
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the net present value (NPV) of earnings that a firm is expected to receive as the result of aninvestment decision
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Detailed explanation-1: -Incremental earnings are best defined as the increase in a company’s earnings due to investments, such as new products to sell.
Detailed explanation-2: -Incremental earnings provide an indication of a company’s growth rate based on its investment decisions. Incremental earnings are best defined as the amount that a firm’s earnings rise as a result of those investments, such as new products to sell, according to Jonathan Berk and Peter Demarzo of Texas State University.
Detailed explanation-3: -The incremental revenue is calculated by dividing the change in the revenue of a specific period by the change in quantity sold.
Detailed explanation-4: -Incremental earnings should include all incremental revenues and costs associated with the project, including project externalities and opportunity costs, but excluding sunk costs and interest expenses.