Any capital budgeting investment rule should depend solely on forecasted cash flows and the opportunity rate of return.The rule itself should not be affected by managers' tastes,the choice of accounting method,or the profitability of other independent projects.

Question

Quizplus · Accepted Answer

Capital budgeting decisions should only be based on the potential profitability of the investment, as measured by the forecasted cash flows and the opportunity rate of return. Other factors such as managerial biases, accounting techniques, and external project profitability should not influence the decision-making process. This ensures that investments are evaluated fairly and consistently based on their expected financial returns.

Any Capital Budgeting Investment Rule Should Depend Solely on Forecasted