Chapter 11, Problem 1MC

Capital investment decisions often involve all of the following except______.

A. qualitative factors or considerations

B. short periods of time

C. large amounts of money

D. risk

To determine

Concept introduction:

Capital budgeting is a technique to plan long term investments of funds in long term activities whose benefit are received for several years.

Example: - Purchase of machineries, purchase of building for business purpose, setting of factories, etc.

To choose:

The item not included in the capital investment decision.

Answer to Problem 1MC

A. Qualitative factors of considerations

Explanation of Solution

Explanation for correct answer:

Capital budgeting or capital investment decision does not considerqualitative factors of considerations. Hence, option A is correct.

Explanation for incorrect answers:

B. Capital investment decision includes the short as well as long period of time under consideration. Hence, this option is incorrect.

C. Capital investment decision considers the large amount of money, for example: In-detail investment for a project. Hence, this option is incorrect.

D. Risk is the inherent component of the capital investment decisions. Hence, this option is incorrect.