Final answer:
A simple cost/benefit analysis is not appropriate for capital expenditure decisions because such decisions require complex analysis techniques like NPV and IRR, and they must also consider the time value of money, long-term returns, and non-financial factors.
Step-by-step explanation:
A simple cost/benefit analysis is not appropriate for capital expenditure decisions. This type of analysis involves comparing costs and benefits to assist in making decisions. However, for capital expenditure decisions, which typically involve large, long-term investments, a more complex analysis that includes considerations like depreciation, the time value of money, and potential returns over an extended period is necessary.
While a simple cost/benefit analysis is a useful tool for many types of decisions, it falls short for capital expenditure decisions due to the complexity and scale of investments. Capital expenditure decisions often require tools such as Net Present Value (NPV), Internal Rate of Return (IRR), or Payback Period calculations, which take into account the long-term implications and the value of money over time.
Additionally, because capital expenditures can have significant and far-reaching consequences for a firm's operations and strategy, they often require a thorough risk analysis, strategic alignment, and consideration of non-financial factors, further complicating the decision-making process.