The purpose of capital budgeting is to: Group of answer choices Avoid all projects that involve risk control the short-term financing used by a firm. determine the correct mix of debt and equity for a firm. identify assets/projects that produce value in excess of their cost.

The decision process Before making capital budgeting decisions, finance professionals often generate, review, analyze, select, and implement long-term investment proposals that meet firm-specific criteria and are consistent with the firm’s strategic goals. Companies often use several methods to evaluate the project’s cash flows and each of them has its benefits and disadvantages. Based on your understanding of the capital budgeting evaluation methods, which of the following conclusions about capital budgeting are valid? Check all that apply. The discounted payback period improves on the regular payback period by accounting for the time value of money.   Managers have been slow to adopt the IRR, because percentage returns are a harder concept for them to grasp.   For most firms, the reinvestment rate assumption in the NPV is more realistic than the assumption in the IRR.     True or False: Sophisticated firms use only the NPV method in capital budgeting decisions.…

Which of the following statements is FALSE? A. When evaluating a capital budgeting decision, we generally include interest expense. B. Only include as incremental expenses in your capital budgeting analysis the additional overhead expenses that arise because of the decision to take on the project. C. Many projects use a resource that the company already owns. O D. As a practical matter, to derive the forecasted cash flows of a project, financial managers often begin by forecasting earnings.

In the textbook's capital budgeting examples, the book assumes that the firm recovers all of its working capital invested into a project.   In the real world, is this a reasonable assumption?  Justify your position and discuss when it would