16. Consideration of risk is essential to the capital budgeting process. Which o

Question

16. Consideration of risk is essential to the capital budgeting process. Which of the following statements is true? a. Recognizing risk is a major step toward bringing theory in line with the real world. b. Business managers do recognize risk, but they do it through judgments based on the results of analyses when decisions are finally made. c. Although we are unable to put the idea that cash flows are subject to probability distributions into our analysis, better capital budget decisions can be made when the relevance of risk is acknowledged. d. All of the above

Explanation / Answer

16. D is correct all the options forms the part of capital budgeting decision.

17. D is Correct as there is no clause of above or below depreciable bais if that was the case then till depreciable basis Mrginal tax rate will be used and the difference of over to that will be taxed at Long term Capital Gains Tax.

18. Capital Rationing allows choosing of project with budget constraint.hence B is Correct.

19. D is Correct as not taking into account renting of own land that can generate cash flows without doing anything.

20. E is Correct all are needed to cintruct relevant cash flows.

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