Capital budgeting decisions are generally based on:
A) Results from past outcomes only.
B) Tentative and potentially unreliable predictions of future outcomes.
C) Speculation of interest rates and economic performance only.
D) Results from current outcomes only.
E) Predictions of future outcomes where risk is eliminated.

Question

Quizplus · Accepted Answer

Capital budgeting decisions involve making long-term investments based on predictions of future outcomes. These predictions are often uncertain and potentially unreliable, as a variety of factors can impact the future performance of an investment. Therefore, the best choice is B, which acknowledges that capital budgeting decisions are based on these tentative predictions. The other choices are incorrect because they either focus exclusively on past or current outcomes, or assume that risk can be fully eliminated from the decision-making process, which is not feasible.

Capital Budgeting Decisions Are Generally Based On