Which measurement is more important when making a capital budgeting decision, net present value or improved customer
Question:
Your company is considering purchasing a server to host the company Web site, which customers use to place their orders. When deciding on this new capital investment, you realize that the net present value of the purchase is negative, meaning the future cash flows associated with the server will not replace the initial investment. However, an important qualitative factor that should be considered with the purchase of a new server is the improved customer service and satisfaction that will be achieved as a result of the purchase. What should you do?
Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Capital Budgeting
Capital budgeting is a practice or method of analyzing investment decisions in capital expenditure, which is incurred at a point of time but benefits are yielded in future usually after one year or more, and incurred to obtain or improve the...
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Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain
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