Question

Explain why it is important to understand that capital budgeting is subject to the validity of the forecasted data. Additionally, explain whether this reduces the reliability of these types of tools. Are there any other alternatives, or are these tools some of the most reliable that currently exist?

Answer 1

Name of Experiment. Experiment No. Date: Experiment Rosu Page No = Why it is important to understand tuat Capital budgeting is subject to validity of forecasted date? Answer: - Manly capital budgeting is also known of LONG TERM DECISIONS' 3 This includes investments in the long term assets or projects for tee purpose of generating future benefits 3) Validity of forecasted data implica 4 o substantial amount of investment b) difficultig ele estimating the benefits to be doomed derived out of such investment overfuture year involving many uncertainitie c) possibilities of incurring substantial losses if such decision need to be devorsed. Secondly of It does not redura due reliability of these type of tools because it involver cast estimation of asset Iproject 2) Benefits receivable Theron ora the economic Life a luce asset moject - Also some of the technique, llich are most reliable like BCE technique, Discounted Cash fow) & Non-BCF Technique Tochniques - which involvy time value of money is like a Net present Value Copy) Internal Carey Polarn (IRR) - Modified CNPV) - Modifica CIRR), profitability indos | Bengit Cost Ratio ID CF

Non DCF Techniques like I pay Back period ? pay Back profitability 3) Accounting Rare of Return CARR)