Which of the following is a reason why risk analysis is an important part of capital budgeting?
A)The people who propose projects have no vested interest in whether or not they are accepted.
B)Marketing managers are rarely excessively optimistic.
C)Project cash flows are risky.
D)Financial analysts are rarely excessively pessimistic.

Question

Quizplus · Accepted Answer

Risk analysis is important in capital budgeting because project cash flows are often risky and uncertain. By conducting risk analysis, financial analysts can evaluate the potential outcomes of a project and determine the level of risk involved, helping decision-makers to make informed and strategic choices. Options A, B, and D are not relevant to why risk analysis is important in capital budgeting.

Which of the Following Is a Reason Why Risk Analysis