Which One of the Following Statements Concerning Capital Budgeting Is

question 40

Multiple Choice

Which one of the following statements concerning capital budgeting is not true?

• A) A basic objective underlying capital budgeting is to select assets that will earn a satisfactory return.
• B) Capital budgeting is the process of identifying, evaluating, selecting, and controlling long-term investment projects.
• C) Because of the existence of advanced forecasting techniques, capital budgeting is based on precise estimates of future events.
• D) Capital budgeting involves estimating the revenues and costs of each proposed project, evaluating their merits, and choosing those worthy of investment.
• E) Capital budgeting uses after-tax cash flows in the analysis of proposed investments.

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Definitions:

Form 6198

An IRS form used by taxpayers to determine the amount of loss from an at-risk activity that is deductible.

IRC

The Internal Revenue Code, which is the comprehensive set of tax laws in the United States governing federal tax obligations.

Active Income/Loss

Income or losses generated from direct business activities or employment, as opposed to passive income from investments.

Passive Income/Loss

Earnings from rental property, limited partnerships, or other enterprises in which the individual is not actively involved.