Problem 1: In essence, capital budgeting is the process of:
a. Deciding what to do with the firm's money
b. Deciding how much capital the firm needs
c. Deciding where to get the money for capital investment projects
d. Deciding when to invest in a new project
Problem 2: Which of the following cash flows is an "incremental cash flow" for the purposes of capital budgeting?
a. Expenditures on plant and equipment for a new project
b. R& D expenditures for a new project during the last three years
c. Dividend payments
d. Reduction of a competitor's sales as a result of the your company's introduction of a new product
Problem 3: In capital budgeting, the payback period is the:
a. Amount of time it takes to receive all the future cash flows from a project
b. Amount of time it takes to pay back any money borrowed to finance the project
c. Amount of time it take for the project to be completed
d. Amount if time it takes to recoup the initial investment for the project