A cash purchase is similar to a capital budgeting decision.

Question

Quizplus · Accepted Answer

Both involve the allocation of funds for a long-term investment or purchase. In a cash purchase, the buyer must consider the opportunity cost of using the cash for the purchase rather than investing it elsewhere. Similarly, in capital budgeting, a company must consider the potential return on investment (ROI) and compare it to the cost of capital to determine if the investment is worth pursuing. Both decisions require a thorough analysis of the potential benefits and costs of the investment.

A Cash Purchase Is Similar to a Capital Budgeting Decision