A major corporation is considering a capital budgeting project that involves the development of a new technology.The controller estimates the net present value to be negative,yet argues that the company should invest in the project.Which of the following statements is most correct?

Question

Quizplus · Accepted Answer

The controller may be considering the option to expand or modify the project in the future, which could potentially turn the net present value positive. Additionally, there may be non-financial benefits to the project that the controller is considering. It is not necessarily appropriate to immediately fire the controller for making a decision based on factors beyond the net present value. The profitability index and capital rationing may also be factors to consider, but are not as directly related to the controller's decision to recommend the project.

A Major Corporation Is Considering a Capital Budgeting Project That