A project manager is developing a business case for a new data center. The initial budget includes costs for purchasing servers, networking hardware, and cooling systems. These are long-term assets that the company will own. How should the project manager categorize these one-time, upfront costs?
Capital Expenses (CapEx) are funds used to acquire or upgrade physical assets like equipment, buildings, or property that will benefit the project over the long term. These are significant investments considered during the discovery phase to assess project feasibility. Operational Expenses (OpEx), in contrast, are the ongoing costs required for the day-to-day functioning of a business, such as salaries and utilities, and are not related to asset acquisition.
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What is the difference between CapEx and OpEx?
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Why are CapEx considerations important during the discovery phase?
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How is CapEx recorded differently from OpEx in accounting?