Question

Sources of cash inflows from capital investments include incremental expenses and installation costs.

True/False

Answer 1

False

Step-by-step explanation:

Incremental expenses are sources of cash outflow which should be capitalized unless the amortization period for the capitalized costs would be one year or less.

Incremental expenses increase the earnings capacity of the company and as such, it should be capitalized.

Installation costs : this cost is required to bring the asset into a working condition. Hence, it should be capitalized.