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  • Digg it UP - 5 Critical Items Never to be Included in Cost Benefit Analysis

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    the current and the future, as best you can.

    Critical Item #2. Arbitrary Accounting Cost/Income Allocations

    Depreciation

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    When dealing with decisions using Cost Benefit Analysis techniques it is very important to follow the proven principles. The health of your company and your reputation depend on it. If these rules are not followed then your decisions could be flawed.

    Let's start, shall we?

    Critical Item #1. Sunk Costs

    Irrecoverable cash outlays that occurred prior to the evaluation of the project are excluded, only the present and future costs/benefits are assessed. You cannot go back in time to add in past costs, only deal in the current and the future, as best you can.

    Critical Item #2. Arbitrary Accounting Cost/Income Allocations

    Depreciation -

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    f your company and your reputation depend on it. If these rules are not followed then your decisions could be flawed.

    Let's start, shall we?

    Critical Item #1. Sunk Costs

    Irrecoverable cash outlays that occurred prior to the evaluation of the project are excluded, only the present and future costs/benefits are assessed. You cannot go back in time to add in past costs, only deal in the current and the future, as best you can.

    Critical Item #2. Arbitrary Accounting Cost/Income Allocations

    Depreciation

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    t, shall we?

    Critical Item #1. Sunk Costs

    Irrecoverable cash outlays that occurred prior to the evaluation of the project are excluded, only the present and future costs/benefits are assessed. You cannot go back in time to add in past costs, only deal in the current and the future, as best you can.

    Critical Item #2. Arbitrary Accounting Cost/Income Allocations

    Depreciation

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    are excluded, only the present and future costs/benefits are assessed. You cannot go back in time to add in past costs, only deal in the current and the future, as best you can.

    Critical Item #2. Arbitrary Accounting Cost/Income Allocations

    Depreciation

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    the current and the future, as best you can.

    Critical Item #2. Arbitrary Accounting Cost/Income Allocations

    Depreciation - Depreciation is not a cash item. It relates to cash expended on capital purchases in previous periods. It is intended to show the decreasing value of the asset as time passes and as the asset ages through use or obsolescence.

    To include depreciation in Cost Benefit Analysis, would be to double-count the expenditure. The decreasing value of the asset is shown by the difference in the purchase price and the eventual disposal or sales price at the end of its life.

    Accruals - Accruals are an accounting method of moving

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