Capital budgeting process * True or false? a. The approval of a firm’s capital budget allows managers to go ahead with any project included in the budget. b. Capital budgets and project authorizations are mostly developed “bottom up.” Strategic planning is a “top-down” process. c. Project sponsors are likely to be overoptimistic.

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Answer 1

Textbook Question

Chapter 11, Problem 1PS

Capital budgeting process* True or false?

a. The approval of a firm’s capital budget allows managers to go ahead with any project included in the budget.
b. Capital budgets and project authorizations are mostly developed “bottom up.” Strategic planning is a “top-down” process.
c. Project sponsors are likely to be overoptimistic.

a)

Expert Solution

Summary Introduction

To discuss: The items whether true or false on the bases of capital budgeting process.

Explanation of Solution

False. Firm’s capital budget isn’t the ultimate sign-off for the specific projects. Most firms need each project appropriation requests and includes more detailed analysis. The capital budgeting is often pruned and revised according to the market conditions.

b)

Expert Solution

Summary Introduction

To discuss: The item whether true or false on the bases of capital budgeting process.

Explanation of Solution

False, the firm’s capital budget should reflect both bottom-up operational detail as well as top-down strategic views.

c)

Expert Solution

Summary Introduction

To discuss: The item whether true or false on the bases of capital budgeting process.

Explanation of Solution

True because cash flow forecasts are regularly overstated.

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Answer 2

Textbook Question

Chapter 11, Problem 1PS

Capital budgeting process* True or false?

a. The approval of a firm’s capital budget allows managers to go ahead with any project included in the budget.
b. Capital budgets and project authorizations are mostly developed “bottom up.” Strategic planning is a “top-down” process.
c. Project sponsors are likely to be overoptimistic.

a)

Expert Solution

Summary Introduction

To discuss: The items whether true or false on the bases of capital budgeting process.

Explanation of Solution

False. Firm’s capital budget isn’t the ultimate sign-off for the specific projects. Most firms need each project appropriation requests and includes more detailed analysis. The capital budgeting is often pruned and revised according to the market conditions.

b)

Expert Solution

Summary Introduction

To discuss: The item whether true or false on the bases of capital budgeting process.

Explanation of Solution

False, the firm’s capital budget should reflect both bottom-up operational detail as well as top-down strategic views.

c)

Expert Solution

Summary Introduction

To discuss: The item whether true or false on the bases of capital budgeting process.

Explanation of Solution

True because cash flow forecasts are regularly overstated.

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Answer 3

Textbook Question

Chapter 11, Problem 1PS

Capital budgeting process* True or false?

a. The approval of a firm’s capital budget allows managers to go ahead with any project included in the budget.
b. Capital budgets and project authorizations are mostly developed “bottom up.” Strategic planning is a “top-down” process.
c. Project sponsors are likely to be overoptimistic.

a)

Expert Solution

Summary Introduction

To discuss: The items whether true or false on the bases of capital budgeting process.

Explanation of Solution

False. Firm’s capital budget isn’t the ultimate sign-off for the specific projects. Most firms need each project appropriation requests and includes more detailed analysis. The capital budgeting is often pruned and revised according to the market conditions.

b)

Expert Solution

Summary Introduction

To discuss: The item whether true or false on the bases of capital budgeting process.

Explanation of Solution

False, the firm’s capital budget should reflect both bottom-up operational detail as well as top-down strategic views.

c)

Expert Solution

Summary Introduction

To discuss: The item whether true or false on the bases of capital budgeting process.

Explanation of Solution

True because cash flow forecasts are regularly overstated.

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Answer 4

Textbook Question

Chapter 11, Problem 1PS

Capital budgeting process* True or false?

a. The approval of a firm’s capital budget allows managers to go ahead with any project included in the budget.
b. Capital budgets and project authorizations are mostly developed “bottom up.” Strategic planning is a “top-down” process.
c. Project sponsors are likely to be overoptimistic.

a)

Expert Solution

Summary Introduction

To discuss: The items whether true or false on the bases of capital budgeting process.

Explanation of Solution

False. Firm’s capital budget isn’t the ultimate sign-off for the specific projects. Most firms need each project appropriation requests and includes more detailed analysis. The capital budgeting is often pruned and revised according to the market conditions.

b)

Expert Solution

Summary Introduction

To discuss: The item whether true or false on the bases of capital budgeting process.

Explanation of Solution

False, the firm’s capital budget should reflect both bottom-up operational detail as well as top-down strategic views.

c)

Expert Solution

Summary Introduction

To discuss: The item whether true or false on the bases of capital budgeting process.

Explanation of Solution

True because cash flow forecasts are regularly overstated.

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Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

a)

Expert Solution

Summary Introduction

To discuss: The items whether true or false on the bases of capital budgeting process.

Explanation of Solution

False. Firm’s capital budget isn’t the ultimate sign-off for the specific projects. Most firms need each project appropriation requests and includes more detailed analysis. The capital budgeting is often pruned and revised according to the market conditions.

b)

Expert Solution

Summary Introduction

To discuss: The item whether true or false on the bases of capital budgeting process.

Explanation of Solution

False, the firm’s capital budget should reflect both bottom-up operational detail as well as top-down strategic views.

c)

Expert Solution

Summary Introduction

To discuss: The item whether true or false on the bases of capital budgeting process.

Explanation of Solution

True because cash flow forecasts are regularly overstated.

Answer 8

a)

Expert Solution

Summary Introduction

To discuss: The items whether true or false on the bases of capital budgeting process.

Explanation of Solution

False. Firm’s capital budget isn’t the ultimate sign-off for the specific projects. Most firms need each project appropriation requests and includes more detailed analysis. The capital budgeting is often pruned and revised according to the market conditions.

Answer 9

a)

Expert Solution

Answer 10

a)

Expert Solution

Answer 11

Expert Solution

Answer 12

Summary Introduction

To discuss: The items whether true or false on the bases of capital budgeting process.

Answer 13

Explanation of Solution

False. Firm’s capital budget isn’t the ultimate sign-off for the specific projects. Most firms need each project appropriation requests and includes more detailed analysis. The capital budgeting is often pruned and revised according to the market conditions.

Answer 14

b)

Expert Solution

Summary Introduction

To discuss: The item whether true or false on the bases of capital budgeting process.

Explanation of Solution

False, the firm’s capital budget should reflect both bottom-up operational detail as well as top-down strategic views.

Answer 15

b)

Expert Solution

Answer 16

b)

Expert Solution

Answer 17

Expert Solution

Answer 18

Summary Introduction

To discuss: The item whether true or false on the bases of capital budgeting process.

Answer 19

Explanation of Solution

False, the firm’s capital budget should reflect both bottom-up operational detail as well as top-down strategic views.

Answer 20

c)

Expert Solution

Summary Introduction

To discuss: The item whether true or false on the bases of capital budgeting process.

Explanation of Solution

True because cash flow forecasts are regularly overstated.

Answer 21

c)

Expert Solution

Answer 22

c)

Expert Solution

Answer 23

Expert Solution

Answer 24

Summary Introduction

To discuss: The item whether true or false on the bases of capital budgeting process.

Answer 25

Explanation of Solution

True because cash flow forecasts are regularly overstated.

Answer 26

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