Typical capital budgeting decisions include the decisions relating to the lease or buy, cost reduction, equipment selection, and product and service pricing.
Capital budgeting is the process that enables an entity to know the profitability of an investment made in long-term projects. It can be determined by using various methods like NPV, payback period, accounting rate of return, etc.
Capital budgeting decisions are as follows:
A) Lease or buy includes the decision whether to acquire the new asset or lease the existing ones.
B) Cost reduction can be done by replacing the old asset.
C) Equipment selection involves which equipment has to be acquired from the provided alternatives.
D) Product and service pricing relates to the type of product or service in which an entity has to invest.
Note: Hiring and firing of employees don't relate to the profitability of any long-term capital project.
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