1. The capital budgeting decision depends in part on the A. availability of fund

Question

1. The capital budgeting decision depends in part on the
A. availability of funds.
B. relationships among proposed projects
C. risk associated with a particular project
D. all of these answers are correct

2. The payback period is often compared to an asset’s
A. warranty period.
B. net present value
C. internal rate of return
D. estimated useful life

3. When using the cash payback technique, the payback period is expressed in terms of
A. dollars
B. years
C. a percent
D. months

4. The primary capital budgeting method that uses discounted cash flow techniques is the
A. profitability index method.
B. annual rate of return method.
C. net present value method
D. cash payback technique.

5. A company's cost of capital refers to the
A. cost of printing and registering common stock shares.
B. total cost of a capital project.
C. rate of return earned on common stock.
D. rate the company must pay to obtain funds from creditors and stockholders.

Explanation / Answer

Dear student, only one question is allowed at a time. I am answering the first question

1)

Capital budgeting decision is the decision to purchase a equipment or fixed asset and determining whether the decision to purchase the asset will give positive returns in the long run or not

In making capital budgeting decisions, availability of funds is important as a large amount is to be invested in the asset. If the funds are not available from own sources, it has to be borrowed and borrowing cost will form part of cost of asset and increase the required rate of return from the asset

Relationship among proposed projects is also important as it affects the proper utilization of equipment

Risk associated with a project is also important as higher the risk, higher is the return required from the asset

So, all the above factors are important in making a capital budgeting decision and so option D is the correct option      

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