All of the following are important reasons for developing an effective process for capital budgeting, except:

a. Companies have a limited amount to use for capital expenditures, so projects must be prioritized (capital rationing).

b. The dollars used for capital investments are material, so the risk of an investment that does not meet expectations can have a substantial impact on business operations.

c. The initial cash outlay is often reversible, so investments should be evaluated to see if an investment should be reversed and allocated elsewhere.

d. Often the results of capital decisions last for a number of years, so the decisions have long-term consequences.

 

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