If Halley Industries reimburses employees who earn masters degrees

1. If Halley Industries reimburses employees who earn master’s degrees and who agree to remain with the firm for an additional 3 years, should the expense of the tuition reimbursement be categorized as a capital expenditure or an operating expenditure?<?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” />

2. Iridium Corp has spent $3.5 billion over the past decade developing a satellite based telecommunication system. It is currently trying to decide whether to spend an additional $350 million on the project. The firm expects that this outlay will finish the project and will generate cash flow of $15 million per year over the next 5 years. A competitor has offered $450 million for the satellites already in orbit. Classify the firm’s outlay as sunk cost or opportunity costs, and specify the relevant cash flows.