The Primary Function of the Capital Budget Is to Forecast

question 155

True/False

The primary function of the capital budget is to forecast the funds required for future investments that must be raised through external funding,that is,by selling stock or bonds.

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Definitions:

Conversion Value

The worth of a convertible security if it was converted into a different security, typically shares of the issuing company, at the current market price.

Straight Bond Value

The present value of a bond's future interest payments and its redemption value at maturity.

Conversion Price

The predetermined price at which convertible security can be exchanged for another asset, often shares of the issuing company's stock.