Why capital budgeting rely on analysis of cash-flows


Question 1: What are the relationships between required return, cost of financing, and investment decisions.

Question 2: Why does capital budgeting rely on analysis of cash flows rather than on net income?

The term "Capital Rationing" is a constraint on the amount of funds that can be invested in a given period by a firm. Explain why at times management may place an artificial constraint on the funds that can be invested in a given period. Give examples.

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Finance Basics: Why capital budgeting rely on analysis of cash-flows
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