BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Reversible
|
|
|
Irreversible
|
|
|
Unimportant
|
|
|
All of the above
|
Detailed explanation-1: -Capital budgeting decisions involve huge funds and are long term decisions. As they involve huge costs one wrong decision would have a big effect on the business. Hence, capital budgeting decisions are irreversible as its difficult to take back the decision.
Detailed explanation-2: -The investment of funds into capital or productive assets, which is what capital budgeting entails, meets all three of the above criteria and therefore is considered a long-term decision.
Detailed explanation-3: -Which of the following is true of capital budgeting decisions? They create value for a firm when the value of the selected productive assets is worth more than their cost.
Detailed explanation-4: -Capital budgeting decisions are based on comparison of a project’s initial investment outlay to the future incremental cash flows of the project and its terminal cash flow.
Detailed explanation-5: -It does not include sunk costs.