Superior analytical techniques,such as NPV,used in combination with risk-adjusted cost of capital estimates,can overcome the problem of poor cash flow estimation and lead to generally correct accept/reject decisions for capital budgeting projects.

Question

Quizplus · Accepted Answer

While superior analytical techniques and risk-adjusted cost of capital estimates can improve the accuracy of capital budgeting decisions, they cannot fully overcome the problem of poor cash flow estimation. The quality of the decision is fundamentally dependent on the accuracy of the cash flow projections.

Superior Analytical Techniques,such as NPV,used in Combination with Risk-Adjusted Cost