Chapter 26, Problem 1QC

To determine

Introduction:

Capital Budgeting: Capital budgeting is a technique to make decisions for investment of the capital of the business. Capital budgeting uses several methods to identify and evaluate projects and helps in making decisions for investment. Capital budgeting has following basic steps:

1. Identification of the opportunities or projects

2. Evaluation of projects

3. Determination of Cash outflows and inflows

4. Making decision of investment in the project

5. Implementation of the decisions

To Choose: The Second step of Capital Budgeting

Answer to Problem 1QC

Solution: c. Getting the accountant involved

Explanation of Solution

Explanation for Correct answer:

The Second step of Capital Budgeting is Evaluation of projects or opportunities available, which requires the involvement of the accountant to use estimated data and methods of capital budgeting to determine if the project would be profitable or not.

Explanation for Incorrect answers:

a. Gathering the money for investment is the last step of the capital budgeting when actual implementation of the project is done.

b. identifying potential projects is the first step of the capital budgeting.

d. All the given options are different steps of the capital budgeting.

Conclusion

Hence, the Second step of Capital Budgeting is c. Getting the accountant involved.