Question

The capital budgeting process involves qualitative and quantitative considerations. These include (list four things)

A) NPV, IRR, Payback period, Risk analysis
B) Payback period, Break-even analysis, NPV, Risk analysis
C) NPV, IRR, Break-even analysis, Sensitivity analysis
D) IRR, Payback period, Sensitivity analysis, Break-even analysis

Answer 1

The capital budgeting process involves qualitative and quantitative considerations, including NPV, IRR, Break-even analysis, and Sensitivity analysis. These tools help evaluate the financial feasibility and profitability of investment projects.

Step-by-step explanation:

The correct answer is choice C) NPV, IRR, Break-even analysis, and Sensitivity analysis. The capital budgeting process involves evaluating and selecting long-term investment projects that will generate future cash flows. Qualitative considerations involve non-financial factors like the strategic fit of the project, market demand, and environmental impact. Quantitative considerations involve financial analysis to determine the feasibility and profitability of the project.

Net Present Value (NPV) calculates the present value of the project's expected cash flows and compares it to the initial investment. Internal Rate of Return (IRR) measures the project's rate of return and compares it to the required rate of return. Break-even analysis determines the point at which the project's revenues cover its costs. Sensitivity analysis assesses how changes in different variables impact the project's profitability.