Companies that are planning to make a long-term investment,like the purchase of machinery,typically use ________ to evaluate whether the endeavor is worth pursuing.

Question

Quizplus · Accepted Answer

Capital budgeting is the process of evaluating long-term investment decisions by analyzing the expected cash flows over the investment's lifetime. It considers factors such as the initial investment, expected cash inflows, and outflows, as well as the project's time horizon, to determine the project's profitability and viability. Amortization tables show the gradual repayment of loans, and cash flows refer to the movement of cash in and out of a company, while present value analysis is the process of determining the current value of future cash flows. While these methods may also be used to evaluate long-term investments, capital budgeting is the most appropriate choice specifically for this purpose.

Companies That Are Planning to Make a Long-Term Investment,like the Purchase