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Business Studies · 2025 · 3 marks
CBSE 2025 · Region 4 · Set 1 · Q23
Abhinav is working as a production manager in a steel
manufacturing plant, 'KPG Ltd.' To compete in the market, he
thought of replacing the existing machinery with new high-
tech machinery. Abhinav discussed his idea with the Chief
Executive Officer who asked him to prepare a proposal for the
same and sent it to the finance manager. The finance manager
said that this decision had to be evaluated carefully as it
involved a huge amount of investment and was irreversible
except at a huge cost.
Identify the decision which the finance manager would like to
evaluate.
State any two factors which may affect this decision.
Marking-scheme solution
Investment Decision/Capital budgeting decision
Factors affecting capital budgeting decision are:
$\displaystyle 1$) Cash flows of the project in the form of series of cash receipts
and payments should be carefully analysed before considering
this decision.
$\displaystyle 2$) Rate of return of the project i.e., the expected returns from each
proposal and the assessment of the risk involved should be taken
into consideration.
$\displaystyle 3$) Investment criteria involves a number of calculations regarding
the cash flows, rate of return, amount of investment and interest
rate which should be evaluated and applied to each proposal.
B
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CBSE Class 12 Business Studies past-paper question from the 2025board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.