Which of the Following Is a Capital Budgeting Decision

question 28

Multiple Choice

Which of the following is a capital budgeting decision?

• A) Should the firm borrow money from a bank or sell bonds?
• B) Should the firm shut down an unprofitable factory?
• C) Should the firm buy or lease a new machine that it is committed to acquiring?
• D) Should the firm issue preferred stock or common stock?

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Definitions:

Total Profit

The amount of financial gain made by a business or individual after accounting for all expenses and costs.

Most Efficient Output

refers to the level of production at which a firm or economy can produce the maximum amount of goods or services with the least waste of resources and effort.

Total Profit

The financial gain made in a transaction or over a period of time, which equals total revenues minus total costs.

Economic Profits

Profits calculated by subtracting both explicit and implicit costs from total revenues, representing the additional value created beyond all resource costs.