Chapter 12, Problem 1Q

What is the difference between capital budgeting screening decisions and capital preference decisions?

To determine

Difference between capital budgeting screening decisions and capital budgeting preference decision.

Explanation of Solution

At the point when an independent venture is pondering a noteworthy interest in its own particular future development, it is said to settle on a capital planning choice. Capital speculations include the outpouring of huge measures of cash. The organization spends this cash with the expectation that the activities will bring about an incredible cost reserve funds or increment in future benefits. There are two sorts of capital planning choices:

1. Screening: It identifies with whether a proposed venture passes a preset obstacle, and

2. Preference: It identifies with choosing among a few contending strategies.

The contrast between these two capital planning, screening choices and inclination choices is that screening choices identify with whether a proposed venture passes a preset obstacle. While inclination choices identify with choosing among a few contending game-plans