Chapter 8 introduces this process which is called

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Unformatted text preview: funds in expectation of future returns. Chapter 8 introduces this process, which is called capital budgeting, and explains how to identify the relevant cash outflows and inflows that must be considered in making capital budgeting decisions. I 355 356 PART 3 LG1 Long-Term Investment Decisions LG2 8.1 The Capital Budgeting Decision Process capital budgeting The process of evaluating and selecting long-term investments that are consistent with the firm’s goal of maximizing owner wealth. Long-term investments represent sizable outlays of funds that commit a firm to some course of action. Consequently, the firm needs procedures to analyze and properly select its long-term investments. It must be able to measure cash flows and apply appropriate decision techniques. As time passes, fixed assets may become obsolete or may require an overhaul; at these points, too, financial decisions may be required. Capital budgeting is the process of evaluating and selecting long-term investments that are consistent with the firm...
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