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Question
Which of the following is not incorporated in Capital Budgeting?
Which of the following is not incorporated in Capital Budgeting?
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Solution
The correct option is D Rate of Cash Discount
Capital budgeting decisions involve huge funds and are long term decisions. As they involve huge costs one wrong decision would have a big effect on the business. The company understands how much tax benefit will the company have after the investment, whether the rate of return is more than the cost of capital and how much is to be paid in terms of present value. All these are taken into account but rate of cash discount is not.
Capital budgeting decisions involve huge funds and are long term decisions. As they involve huge costs one wrong decision would have a big effect on the business. The company understands how much tax benefit will the company have after the investment, whether the rate of return is more than the cost of capital and how much is to be paid in terms of present value. All these are taken into account but rate of cash discount is not.
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