Risks Associated with Capital Budgeting

Capital budgeting decisions are risky. For this discussion question: ● Research the risks associated with capital budgeting and identify the three that you believe are the most significant risks. ● Describe these risks and support your assertion with specific reasons. Your text may be used as a source; however, it is required that at least one additional source be used. Capital budgeting refers to the process of determining which proposed fixed asset purchase, such as new machinery, replacement machinery, new plants, new products, new research and development projects, etc., a business should accept or reject; capital budgeting is a process used to create a quantitative display of each proposed fixed asset investment, providing a rational basis for making a decision (Bragg, 2021). Capital budgeting, or investment appraisal, is the planning process used to determine whether an organization’s long-term investments are worth pursuing, the risks that can arise here involve the potential that a chosen action or activity, or even inaction, will lead to a loss (The Relationship Between Risk and Capital Budgeting | Boundless Finance, n.d.-a).