Question

Risk in capital budgeting implies that the decision-maker knows ___________of the cash flows.(a): variability(b): probability(c): certainty(d): none of the above

Answer 1

The answer is probability of the cash

Answer 2

Risk in ‘capital budgeting’ implies that the ‘decision-maker’ knows the certainty of the cash flows.

Option: (c)

Explanation:

• Capital budgeting is an important aspect of investment in marketing decisions.  

• It is necessary to evaluate and take a proper analysis before deciding on investing the money because wrong investments can lead to wastage of money.  

• Capital budgeting is risky and it is dependent on the concept of the ‘future value of money’ which may be invested now.  

• It is dependent on the ‘net present value’, rate of interest return and the timing of the cash flows.