Which of the following factors is least important to capital budgeting decisions?
A) The time value of money
B) The risk-return tradeoff
C) Net income based on accrual accounting principles
D) Cash flows directly resulting from the decision

Question

Quizplus · Accepted Answer

Net income based on accrual accounting principles is least important to capital budgeting decisions because it does not directly reflect the cash flows of the project. Capital budgeting decisions focus on cash flows, not accounting income, because cash flows are necessary to pay for investments and generate profits. The time value of money, risk-return tradeoff, and cash flows directly resulting from the decision are all important factors in capital budgeting decisions because they directly impact the project's future cash flows and profitability.

Which of the Following Factors Is Least Important to Capital