Lucy Bennett is angry with Austin Lyte. He is behind schedule developing supporting material for tomorrows capital

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Lucy Bennett is angry with Austin Lyte. He is behind schedule developing supporting material for tomorrow’s capital budget committee meeting. When she approached him about his apparent lackadaisical attitude in general and his tardiness in particular, he responded, “I don’t see why we do this stuff in the first place. It’s all a bunch of estimates. Who knows what future cash flows will really be? I certainly don’t. I’ve been doing this job for five years, and no one has ever checked to see if I even came close at these guesses. I’ve been waiting for marketing to provide the estimated cash inflows on the projects being considered tomorrow. But, if you want my report now, I’ll have it in a couple of hours. I can make up the marketing data as well as they can.”

Required
Does Mr. Lyte have a point? Is there something wrong with the company’s capital budgeting system? Write a brief response explaining how to improve the investment evaluation system.

Capital Budgeting
Capital budgeting is a practice or method of analyzing investment decisions in capital expenditure, which is incurred at a point of time but benefits are yielded in future usually after one year or more, and incurred to obtain or improve the...
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Fundamental Managerial Accounting Concepts

ISBN: 978-0078025655

7th edition

Authors: Thomas Edmonds, Christopher Edmonds, Bor Yi Tsay, Philip Old

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