Final answer:
In capital budgeting, market share should be discounted as it is not a direct cash flow. Decisions rely on comparing present costs with the present discounted value of future cash flows and revenues, considering the initial investment and the chosen discount rate.
Step-by-step explanation:
When determining the feasibility of a capital budgeting project, market share should be discounted because it is not a direct cash flow but rather an indicator of a company's relative position in the market. Decisions about capital budgeting should be based on present discounted value, which involves comparing present costs to the present value of future benefits. This calculation incorporates the initial investment, future cash flows, and projected revenue since they constitute the actual financial gains or expenditures related to the project. You must apply a suitable discount rate to future cash flows to determine their present value, considering the cost of financial capital and potential returns to be earned. Market share, while important for strategic considerations, does not provide a direct measure of financial performance or cash flow and thus is not typically used in present value calculations for capital budgeting purposes.