Capital investments can be very risky; they are usually long-term decisions that require large sums of cash. Since every department will want capital improvements and cash is usually scarce, it is imperative that management make the right decisions. When determining the minimum required rate of return, what should management consider? What qualitative factors should also go into the decision?

Capital investments can be very risky; they are usually long-term decisions that require large sums of cash. Since every department will want capital improvements and cash is usually scarce, it is imperative that management make the right decisions. When determining the minimum required rate of return, what should management consider? What qualitative factors should also go into the decision?

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter12: Capital Investment Decisions

Section: Chapter Questions

Problem 2MCQ: To make a capital investment decision, a manager must a. estimate the quantity and timing of cash...

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When determining the minimum required rate of return, what should management consider?

What qualitative factors should also go into the decision?

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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