Capital Budgeting Paper 34

Capitalized between points of technological feasibility and date of product release.

Incorporates cash flow probabilities into the analysis.

Weighted average of construction expenditures.

The long-term asset acquisition decision.

The capitalized cost of equipment excludes:

Asset retirement obligations:

If a company incurs disposition obligations as a result of acquiring an asset:

Grab Manufacturing Co. purchased a ten-ton draw press at a cost of $180,000 with terms of 5/15, n/45. Payment was made within the discount period. Shipping costs were $4,600, which included $200 for insurance in transit. Installation costs totaled $12,000, which included $4,000 for taking out a section of a wall and rebuilding it because the press was too large for the doorway. The capitalized cost of the ten-ton draw press is:

Holiday Laboratories purchased a high speed industrial centrifuge at a cost of $420,000. Shipping costs totaled $15,000. Foundation work to house the centrifuge cost $8,000. An additional water line had to be run to the equipment at a cost of $3,000. Labor and testing costs totaled $6,000. Materials used up in testing cost $3,000. The capitalized cost is: