Question

3. BP's committing of$500 million to partnership with University of California-Berkeley to develop new sources of energy is a capital budgeting decision. a.True b.False

Answer 1

Answer:

True

Explanation:

A capital budgeting decision refers to how a business decides to invest money it already holds. Businesses decide how to invest their current assets anticipating the potential future revenues that those investments will yield.

In this case, BP is investing $500 with the University of California-Berkeley probably as an sponsor of research projects (as part of R&D). Any potentially revenue generating project should then be shared by both the university and BP.