The best criterion for success in a capital budgeting decision would be to:

Question

Quizplus · Accepted Answer

Maximizing the difference between cash inflows and cost (also known as net present value) is the most appropriate criterion for success in a capital budgeting decision. This takes into account the time value of money, and considers all relevant costs and benefits that occur over the life of the project. Minimizing the cost alone may not be the best decision if it results in a project that generates low cash inflows or has a long payback period. Maximizing the number of projects or financing all projects with debt do not necessarily result in the best overall outcome for the company.

The Best Criterion for Success in a Capital Budgeting Decision