Reference no: EM132485209

Concepts used in cash flow estimation and risk analysis

The owner of Café Bakka is considering investing in a new point-of-sale system. He spent $10,000 on his current point-of-sale system five years ago. The new point-of-sale technology will cost $25,000, and will dramatically improve the speed at which his counter staff will be able to take orders, and reduce the owner's administrative work. How should the owner account for the cost of the current point-of-sale technology when performing the capital budgeting analysis to determine whether or not to purchase the new point-of-sale technology?

Pick one:

• He should include the cost of the current point-of-sale system as part of the cost of the new point-of-sale system
• He should ignore the cost of the current point-of-sale system when evaluating the cost of the new point-of-sale system

A cell phone company recently gave customers the ability to buy application that they can download to their cell phones. Allowing customers to use the applications increased cell phone sales. This is an example of externality.

• a positive within-firm
• a negative within-firm
• an environmental