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Why does capital budgeting rely on analysis of cash flow rather than net income?

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Why does capital budgeting rely on analysis of cash flows rather than on net income?

What does the term 'mutually exclusive investments' mean?

If corporate managers are risk-averse, does this mean they will not take risks? Explain.

Explain how the concept of risk can be incorporated into the capital budgeting process.

If risk is to be analyzed in a qualitative way, place the following investment decisions in order from the lowest risk to the highest risk:
a. New equipment.
b. New market.
c. Repair of old machinery.
d. New product in a foreign market.
e. New product in a related market.
f. Addition to a new product line.

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Solution Summary

This explains the reason of capital budgeting rely on analysis of cash flows rather than on net income and other questions about capital budgeting in 1290 words.

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