In theory,any capital budgeting investment rule should depend solely on forecasted cash flows and the opportunity cost of capital.The rule itself should not be affected by managers' tastes,the choice of accounting method,or the profitability of other independent projects.

Question

Quizplus · Accepted Answer

Capital budgeting investment rules are based on objective factors such as cash flows and opportunity cost of capital, and should not be influenced by subjective factors such as personal preferences or accounting methods. The rules are designed to guide decision making based on the financial performance of each project, independent of the profitability of any other projects.

In Theory,any Capital Budgeting Investment Rule Should Depend Solely on Forecasted