Capital budgeting decisions must be based on the accounting income the project generates since stockholders are concerned with the reported net income the firm generates.

Question

Quizplus · Accepted Answer

Capital budgeting decisions should not solely rely on accounting income as it may not reflect the true cash flows and financial implications of the project. Instead, it should consider factors such as cash flows, risk, and the time value of money to make informed decisions that maximize shareholder wealth.

Capital Budgeting Decisions Must Be Based on the Accounting Income