Q1 - Capital Budgeting

What is the main criterion for selection of a project in a capital investment decision?

• Expected cash inflows and outflows

• Financial outlay

• Operational use

• Market factors

What is the primary importance of capital budgeting decision?

• To maximize profits

• To allocate resources efficiently

• To minimize risk

• To maintain liquidity

What are the types of capital investment projects based on nature?

• Replacement, Expansion, Diversification

• Dependent, Independent, Mutually exclusive

• Payback period, Discounted payback period, ARR

• NPV, IRR, Profitability index

What does the decision-tree analysis provide for a project's potential scenarios?

• Expected profitability based on cash flow

• Cushion cover in business during uncertain periods

• Effect of a key variable on the project's profitability

• Impact of a given scenario on a project

What is the primary focus of the sensitivity analysis for capital investment projects?

• Cushion cover in business during uncertain periods

• Recovery of initial investment in the shortest time period

• Impact of a given scenario on a project

• Effect of a key variable on the project's profitability