A Capital Budgeting Decision Method That Considers the Time Value

question 71

Multiple Choice

A capital budgeting decision method that considers the time value of money is the:

• A)accounting rate of return method.
• B)return on stockholders' equity method.
• C)cash payback method.
• D)internal rate of return method.

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Definitions:

Preferred Shareholders

Investors who own preferred shares in a company, granting them priority over common shareholders for dividends and assets distribution, particularly in liquidation.

Stocks

Financial instruments that represent ownership in a company or corporation and represent a proportionate claim on its assets and earnings.

Valuation

The process of determining the present value of an asset or a company, based on its earnings, market position, and future potential.

Private Company

A business owned by private investors, shareholders, or owners, and not publicly traded on stock exchanges. It operates with less regulatory oversight than public companies.