Financial Management: Core Concepts, Third Edition

Chapter 9 Capital Budgeting Decision Models

AT a Glance

1. LO1 Explain capital budgeting and differentiate between short-term and long-term budgeting decisions.

   In general, we can separate short-term and long-term decisions into three dimensions: length of effect, cost, and degree of information gathering prior to the decision. The longer the effect and the higher the cost associated with a decision, the greater the time and degree allotted to gathering information on choices and the more sophisticated or complex the decision model.

2. LO2 Explain the payback period model and its two significant weaknesses and how the discounted payback period model ...