Short Answer

1.What is capital budgeting?

2.What does the notion “time value of money” mean? Why is it important for project evaluation?

3.“Capacity resources are lumpy in nature.” What does the term lumpy mean in this statement? Why is it relevant in the context of capital budgeting?

4.What is the difference between a capital budget and an operating budget?

5.What are the four important elements of a capital expenditure decision?

6.Define the term net present value. Describe how you would calculate the NPV for a project proposal.



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