Sunk Cost like research and development, that already occurred shouldn't be part of cash flow analysis in the capital budgeting process.
The procedure a company uses to assess potential big projects or investments is called capital budgeting. Before a project is accepted or denied, capital budgeting is important . samples of such projects include the construction of a new plant or a significant investment in a third party enterprise.
Even though they make up a very tiny fraction of a company's total assets, capital assets are typically long-term investments like new machinery, buildings, and software updates.Making decisions on the long-term investment of a company's capital into operations is completed through capital budgeting.
Capital budgeting includes planning the longer term returns on investments in machinery, land , and new technologies.
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