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.
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.
Capital Budgeting Reliance on Analysis of Cash Flows
1. Why does capital budgeting rely on analysis of cash flows rather than on net income?
2. What is normally used as the discount rate in the net present value method?
3. Have you ever heard of the replacement decision?
4 Does capital budgeting deals with actual dollars?View Full Posting Details