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8. Conclusions about capital budgeting The decision process Before making capital budgeting decisions, finance professionals...

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Accounting

8. Conclusions about capital budgeting

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 firms strategic goals.

Companies often use several methods to evaluate the projects 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.

Managers have been slow to adopt the IRR, because percentage returns are a harder concept for them to grasp.

The NPV shows how much value the company is creating for its shareholders.

For most firms, the reinvestment rate assumption in the MIRR is more realistic than the assumption in the IRR.

is the single best method to use when making capital budgeting decisions.

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