Reading 44: Capital Budgeting LOSa习题精选 2010, budgeting, including, capital, process

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Session 11: Corporate Finance
Reading 44: Capital Budgeting

LOS a: Explain the capital budgeting process, including the typical steps of the process, and distinguish among the various categories of capital projects.

Which of the following types of capital budgeting projects are most likely to generate little to no revenue?

A) Replacement projects to maintain the business.

B) New product or market development.

C) Regulatory projects.

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Mandatory regulatory or environmental projects may be required by a governmental agency or insurance company and typically involve safety-related or environmental concerns. The projects typically generate little to no revenue, but they accompany other new revenue producing projects and are accepted by the company in order to continue operating.

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Which of the following steps is least likely to be an administrative step in the capital budgeting process?

A) Conducting a post-audit to identify errors in the forecasting process.

B) Forecasting cash flows and analyzing project profitability.

C) Arranging financing for capital projects.

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Arranging financing is not one of the administrative steps in the capital budgeting process. The four administrative steps in the capital budgeting process are:

1. Idea generation
2. Analyzing project proposals
3. Creating the firm-wide capital budget
4. Monitoring decisions and conducting a post-audit