Evaluate the capital investments projects based on the given statement.
Explanation of Solution
Capital budgeting: Capital budgeting is a process by which the management can plan and evaluate the investment proposal of plant assets. The capital budgeting decision is crucial for the long-run financial health of a business enterprise, because the large amount of funds is committed for long period of time, at the same time the capital budgeting decisions are difficult to reverse once the funds have been committed.
Evaluate the capital investments projects based on the given statement as follows:
“Time is money” is an apt phrase to evaluate the capital investment projects, because today cash flow is not economically equivalent to the future cash flow. Since, today cash flow can be invested for some rate of return; a dollar received now is more valuable than a dollar received in future.
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Chapter 16 Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
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- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT