What Is Capital Budgeting? - Techniques, Analysis & Examples


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What is capital budgeting?

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1. Which one is NOT a technique used to make a capital budgeting decision?


Given the following cash flows:

Initial investment at Time 0: $400,000

Net cash inflows: Time 1: $20,000; Time 2: $70,000; Time 3: $110,000; Time 4: $200,000; Time 5: $400,000.

(Please note that Time 0 is the start of year 1 and Time n is the end of Year n - for example Time 5 is the end of year 5.)

What is the Payback period?

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About This Quiz & Worksheet

The quiz/worksheet will ask you broad-stroke questions about capital budgeting. Thus, you'll be tested on things like its definition, techniques, and impacts on money.

Quiz & Worksheet Goals

More precisely, you'll be examined on the following:

  • Capital budgeting's meaning
  • Techniques used to make capital budgeting decisions
  • Money traveling in/out of a business
  • Basis of capital budgeting decisions

Skills Practiced

  • Knowledge application - use your knowledge to answer questions about capital budgeting decision-making techniques
  • Interpreting information - verify that you can read information regarding the money that goes in and out of a business
  • Reading comprehension - ensure that you draw the most important information from the related corporate finance lesson

Additional Learning

You've got a chance to learn even more about capital budgeting with the help of our related lesson, What Is Capital Budgeting? - Techniques, Analysis & Examples. This lesson covers the following topics:

  • Mechanics of capital budgeting
  • Money's time value
  • Net present value
  • Internal rate of return
  • Payback period