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Capital expenditure 65,000( actual cost ye 31 may 20X3) + 6%( inflation) 68,900( budget cost for ye 20X4)
The full $65,000 actual costs for the year ended 31 May 20X3 related to improvements
made to the school gym. This year, the canteen is going to be substantially improved,
although the extent of the improvements and level of service to be offered to pupils is still
under discussion. There is a 0.7 probability that the cost will be $145,000 and a 0.3
probability that it will be $80,000. These costs must be paid in full before the end of the
year ending 31 May 20X4.
Expected capital expenditure [(0.7 × $145,000) + (0.3 × $80,000)] = 125,500
Would you mind explaining this to me! please
why $65000 not taken??
The $65,000 was the cost last year, but we are preparing the budget for this year 🙂