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kondor19780726 [428]
3 years ago
15

Capital budgeting decisions are risky because the outcome is uncertain, large amounts are usually involved, the investment invol

ves a long-term commitment, and the decision could be difficult or impossible to reverse.
True / False.
Business
1 answer:
VARVARA [1.3K]3 years ago
6 0

Answer:

True.

Explanation:

Capital budgeting is the process whereby a business carries out an evaluation of potential major projects or investments. Examples of these investments and projects may include construction of a new plant or a big investment in an external venture.

A capital budget is risky because it is a plan for investing in long-term assets such as buildings and machinery, therefore, risk is inevitable.

The various risks include:

  • Investment of large amounts of cash.
  • Cash flows not being paid in time as agreed.
  • The risk of the investee company collapsing.
  • The management sinking the invested funds in risky projects.
  • Decisions could be difficult or impossible to reverse.
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GarryVolchara [31]

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