Practice Meaning And Importance Of Capital Budgeting (25.1) - Capital Budgeting Techniques

Practice: Meaning and Importance of Capital Budgeting

Lesson 25.1Capital Budgeting Techniques

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8 questions

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6 sample questions

Question 1.
What is capital budgeting?
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Think about investments that last for a long time.
Question 2.
Why is capital budgeting important?
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Consider how these decisions affect a company’s future.
3Question 3.
What does capital budgeting primarily focus on?
- Short-term gains
- Long-term investments
- Daily expenses
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Think about investments that require a lot of planning.
4Question 4.
True or False: Once a capital budgeting decision is made, it can be easily reversed.
- True
- False
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Consider the nature of long-term commitments.
Question 5.
A company has to decide between two projects: Project A requires a $1 million investment and promises $250,000 annually for 5 years, while Project B requires $800,000 and promises $200,000 annually for 6 years. Calculate the NPV for both with a 5% discount rate and decide which project is better.
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Consider how each project's cash flow timing affects the outcome.
Question 6.
Discuss how a small startup might incorporate risk management into its capital budgeting process. Provide examples of specific strategies.
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Think about how small businesses might limit their financial exposure.

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