Capital budgeting analysis is based on

Question

Quizplus · Accepted Answer

Capital budgeting analysis is focused on evaluating potential long-term investment opportunities by analyzing cash inflows and outflows that are incremental to the project. This is typically achieved by estimating future cash flows, discounting them to present value, and comparing them to the initial investment cost to determine the project's net present value (NPV), internal rate of return (IRR), or other financial metrics. While expected profits and sales may be input variables in the analysis, the focus is on cash flows rather than accounting profits. Allocated costs that do not change as a result of the project, as well as past expenditures, are generally not included in the analysis, unless they impact the project's future cash flows.

Capital Budgeting Analysis Is Based on