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:

Cost of Goods Sold

The total cost directly related to the production of the goods sold by a company.

Income Statement

A financial statement that shows a company's revenues, expenses, and profit or loss over a specific period.

Perpetual Inventory System

An inventory management method that continuously updates the count and value of inventory, reflecting additions and subtractions in real-time.

FOB Shipping Point

An Incoterm indicating that the buyer assumes ownership and risk for goods at the point of departure from the seller's shipping location.