In selecting capital projects, organizations choose
A)the alternative that matches the RRR.
B)the alternative that has revenues that exceed its costs.
C)the alternative that has the highest revenues.
D)the alternative that has the longest time horizon, but also exceeds the RRR.
E)the alternative that provides benefits that exceed predicted costs by the greatest amount.

Question

Quizplus · Accepted Answer

The most appropriate selection criterion for capital projects is to choose the alternative that provides benefits exceeding the predicted costs by the greatest amount. This approach ensures that the project has a positive net present value and is financially beneficial to the organization. The other choices, such as selecting the alternative that matches the RRR or has the highest revenues, do not necessarily guarantee that the project is financially lucrative.

In Selecting Capital Projects, Organizations Choose