In Theory, Capital Budgeting Decisions Should Depend Solely on Forecasted

question 4

True/False

In theory, capital budgeting decisions should depend solely on forecasted cash flows and the opportunity cost of capital.The decision criterion should not be affected by managers' tastes, choice of accounting method, or the profitability of other independent projects.

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Definitions:

Weighted-Average Method

A process costing method that calculates unit costs by combining costs and outputs from the current and prior periods.

Prior Period Costs

Costs that were incurred in a previous accounting period but are recorded or recognized in the current period's financial statements.

Processing Costing System

An accounting system used to allocate production costs to products or services when they are mass-produced in continuous processes.

Finished Goods Warehouse

A storage area for products that have completed the manufacturing process and are ready to be sold or distributed.