Which of the following are typical consequences of good capital budgeting decisions?

 Which of the following are typical consequences of good capital budgeting decisions?

A) The firm increases in value.

B) The firm gains knowledge and experience that may be useful in future decisions.

C) Good capital budgeting decisions help a company define its core competencies.

D) All of the above.

Errors in capital budgeting decisions

A) tend to average out over time.

B) decrease the firm's value.

C) are diminished because the time value of money makes future cash flows less important.

D) are easily reversed.

Which of the following factors is least important to capital budgeting decisions?

A) The time value of money

B) The risk-return tradeoff

C) Net income based on accrual accounting principles

D) Cash flows directly resulting from the decision

Which of the following would be considered a capital budgeting decision?

A) Walmart purchases inventory for resale to customers.

B) Apple sells bonds and uses the proceeds to repurchase stock.

C) Goldman Sachs obtains short-term loans to finance day to day operations.

D) Pfizer develops a new therapy and brings it to market.

Which of the following is a typical capital budgeting decision?

A) Purchase of office supplies

B) Granting credit to a new customer

C) Replacement of manufacturing equipment with more modern and efficient equipment

D) Financing the firm with more long-term debt and less equity

Good capital investment opportunities are most likely to exist when

A) many firms compete to sell similar products.

B) interest rates are high and rising.

C) goods and services can be produced cheaply using readily available tools and technologies.

D) a line of business is expensive to enter and uses proprietary technology.

Errors resulting from a capital budgeting decision are not considered major since the consequences of such errors average out over the life of the investment.

Answer:  FALSE

Competitive market forces make it imperative for a firm to have a systematic strategy for generating capital-budgeting projects.

Answer:  TRUE

The size of capital investments and the difficulty in reversing them once they are made make capital-budgeting decisions very important to the firm.

Answer:  TRUE

Capital budgeting is the decision-making process with respect to investment in working capital.

Answer:  FALSE

Some capital budgeting decisions may be mandated by government regulations.

Answer:  TRUE

The primary objective of all capital budgeting decisions is to increase the size of the firm.

Answer:  FALSE