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Capital budgeting and factors than can affect it

1. Explain how each of the following actions or problems can distort or disrupt the capital budgeting process.

a. Overoptimism by project sponsors.
b. Inconsistent forecasts of industry and macroeconomic variables.
c. Capital budgeting organized solely as a bottom-up process.

2. New-model commercial airplanes are much more fuel-efficient than older models. How is it possible for airlines flying older models to make money when its competitors are flying newer planes? Explain briefly.


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financial executives.org

1. A. Over optimism can cause either too much expenses or not enough ( if they think the product or product will be inexpensive to make or ...

Solution Summary

This solution provides detailed answers about economic forecasts and variables that can affect them in the real world. It also includes a discussion about profitability scenarios about older versus newer fleets of airplanes and competing companies.