What are the capital budgeting problems?

Answer 1

Capital budgeting problems involve the challenges organizations face when evaluating and selecting long-term investment projects. Key issues include accurately estimating future cash flows, assessing the risk associated with these cash flows, determining an appropriate discount rate, and managing uncertainty in project outcomes. Additionally, firms must balance competing projects and allocate limited resources effectively, often leading to conflicts between short-term and long-term financial goals. These complexities can impact a company's overall financial health and strategic direction.