The Main Purpose of Capital Budgeting Is to Help Managers

question 65

Multiple Choice

The main purpose of capital budgeting is to help managers make decisions about

• A) long-term investments.
• B) short-term investments.
• C) discounts to offer to customers.
• D) nonfinancial constraints on expansion.

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Definitions:

Interest Rate Fluctuations

Variations in the interest rates over time, affecting borrowing costs and investment returns.

Inflation Uncertainty

The unpredictability regarding the rate at which the general level of prices for goods and services is rising, and subsequently, how purchasing power is being eroded.

Expected Return

The mean of the probability distribution of possible returns for a security or portfolio over a specified period.