Question

Which of the following is not an important qualitative factor to consider in the capital budgeting

decision?
A. regulations that mandate investment to meet safety, environmental, or access
requirements.
B. technological developments within the industry may require new facilities to maintain
customers or market share at the cost of lower ROI for a period of time.
C. commitment to a segment of the business that requires capital investments to achieve or
regain competitiveness even though that segment does not have as great an ROI as
others.
D. all of the above are important qualitative factors to consider.

Answer 1

All listed factors, including regulations, technological developments, and business segment commitments, are important qualitative factors in capital budgeting decisions. Costs like environmental regulations are also considered, though they are typically a minor part of the total costs.

Step-by-step explanation:

The student asked which factor is not an important qualitative factor to consider in capital budgeting decisions. The options listed (regulations that mandate investment, technological developments, and commitment to a business segment) are all important qualitative factors.

So, the appropriate response would be that 'all of the above are important qualitative factors to consider.'

When businesses make capital budgeting decisions, they take into account many factors such as the costs of labor and financial capital, proximity to reliable suppliers, customer locations, the quality of transportation, communications, and electrical power networks, the level of taxes, and the competence and honesty of the local government. The cost of environmental regulations can also affect decisions, although these typically represent a small portion of total costs.