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Unformatted text preview: nd are reviewed by finance personnel. Proposals that require large
outlays are more carefully scrutinized than less costly ones.
2. Review and analysis. Formal review and analysis is performed to assess the
appropriateness of proposals and evaluate their economic viability. Once the
analysis is complete, a summary report is submitted to decision makers. 1. Some firms do, in effect, capitalize advertising outlays if there is reason to believe that the benefit of the outlay
will be received at some future date. The capitalized advertising may appear as a deferred charge such as “deferred
advertising expense,” which is then amortized over the future. Expenses of this type are often deferred for reporting
purposes to increase reported earnings, whereas for tax purposes, the entire amount is expensed to reduce tax
liability. CHAPTER 8 TABLE 8.1 Capital Budgeting Cash Flows 357 Key Motives for Making Capital Expenditures Motive Description Expansion The most common motive for a capital expenditure is to expand the level
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This document was uploaded on 01/19/2014.
- Fall '13