Why can corporations compare unique capital projects using capital budgeting techniques?

Capital budgeting techniques are essential for evaluating and comparing unique capital projects, primarily because they provide a measure of Net Present Value (NPV). NPV is a financial metric that captures the expected monetary gains from a project by considering all cash inflows and outflows over time, adjusted for the time value of money. By calculating NPV, organizations can assess the profitability of multiple capital projects on a comparable basis, even when those projects differ in scale, duration, or cash flow patterns.

Using NPV allows managers to determine not only whether a project is likely to add value to the company but also to rank potential investments. Projects with a positive NPV are generally seen as worthwhile, while others with negative NPV present a potential loss. This makes it easier for decision-makers to prioritize projects based on financial viability.

While it's true that capital budgeting techniques involve considerations related to ROI and discount rates, NPV is particularly valuable because it directly reflects the value added to the corporation, making it a central tool for comprehensive investment analysis. The statement about unique projects not being comparable is incorrect because capital budgeting techniques specifically enable such comparisons, allowing firms to make informed strategic decisions.