Answer (D) is correct . During the information-acquisition stage of the capital budgeting process, quantitative financial factors are given the most scrutiny. These include initial investment and periodic cash inflow. Nonfinancial measures, both quantitative and qualitative, are also identified and addressed. Examples include the need for additional training on new equipment and uncertainty about technological developments and competitors’ actions.
Answer (A) is incorrect because The identification and definition stage involves identifying and defining those projects and programs that are needed to attain the entity’s objectives.
Answer (B) is incorrect because During the selection stage, the project(s) that will increase shareholder value by the greatest margin are chosen for implementation.
Answer (C) is incorrect because Potential investments are subjected to a preliminary evaluation by representatives from each function in the entity’s value chain during the search stage of the capital budgeting process.
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