Question

Navistar Trucking has adopted a new approach to capital budgeting. What is the fundamental way in which the new approach differs from the traditional approach

Answer 1

They use a capital budgeting approach that has a bigger planning cycle, also focus is on shareholder value

Step-by-step explanation:

Navistar Trucking adopted capital budgeting accounting system. This entails estimating if the price being paid for long term investments in projects and equipment is worthwhile.

Methods like internal rate of return, payback period, and net present value are used to assess value of investment.

Navistar trucking plans its capital budgeting in 5-10 years unlike traditional approach that does so every year.

Also focus is on increasing the value of shareholders over time.