Economics Capital Budgeting Questions
The project life has a significant impact on capital budgeting decisions. A longer project life generally increases the potential for higher returns and cash flows over time, which can make the project more attractive. It allows for a longer period to recover the initial investment and generate profits. Additionally, a longer project life may also increase the risk and uncertainty associated with the project, as there is a greater chance for changes in market conditions, technology advancements, and other factors that could affect the project's viability. Therefore, the project life is an important consideration in capital budgeting decisions as it affects the potential profitability and risk of the investment.