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Capital budgeting is just selecting the decision rule?

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Critically discuss this statement:

'In essence, capital budgeting is a matter of selecting the correct decision rule'.

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Solution Summary

Your response is 208 words and disagrees with the statement above.

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I can see where someone might think that capital budgeting is matter of picking the right "hurdle" or "decision rule" for what projects get accepted and which get rejected. After all, the final decision is often hinged on whether you decide that payback or IRR or NPV will "rule" the decision. So, a decision rule must be ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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