In making capital-budgeting decisions, it is relevant to consider
A) future data that will differ among competing alternatives.
B) the cash outflows caused by future depreciation deductions.
C) the book value of equipment.
D) the original cost of currently owned equipment.

Question

Quizplus · Accepted Answer

In making capital-budgeting decisions, it is crucial to consider future data that will vary among competing alternatives. This involves predicting future cash flows, determining the cost of capital, and assessing risk. Choosing a capital budgeting project based on future data is much more reliable than relying on historical cost data. Therefore, option A is the best choice.

Option B is incorrect because depreciation is a non-cash expense, and it doesn't affect cash outflow. Option C is also not relevant since the book value of equipment doesn't determine the cash inflows/outflows or the returns on investment. Option D is also not a crucial factor since the original cost of currently owned equipment doesn't indicate which project is more financially profitable.

In Making Capital-Budgeting Decisions, It Is Relevant to Consider