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Why are capital budgeting decisions often difficult

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Question: 1. Why are capital budgeting decisions often difficult?

2. The following data relate to a company's decision on whether to purchase a machine:

Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $180,000

Salvage value . . . . . . . . . . . . . . . . . . . . . . . 15,000

Annual after-tax net income . . . . . . . . . . . 40,000

The machine's accounting rate of return, assuming the even receipt of its net cash flows during the year and use of straight-line depreciation, is

(a) 22%,

(b) 41%, or

(c) 21%.

Reference no: EM131539771

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