The capital budgeting decisions of a firm will have no effect on the share price of the common stock.

Question

Quizplus · Accepted Answer

The capital budgeting decisions of a firm, such as investing in new projects or expanding operations, can have a significant impact on future cash flows and profitability, which can in turn affect the expectations and perceptions of investors. If investors believe that the firm is making wise investment decisions, it can increase demand for the stock and drive up the share price. On the other hand, poor investment decisions may lead to decreased demand and lower prices. Therefore, capital budgeting decisions can have a significant effect on the share price of the common stock.

The Capital Budgeting Decisions of a Firm Will Have No