Although the Three Capital Budgeting Methods Are Equivalent,they All Can

question 12

Multiple Choice

Although the three capital budgeting methods are equivalent,they all can have difficulties making computation impossible at times. The most useful methods or tools from a practical standpoint are:

• A) APV because debt levels are unknown in future years.
• B) WACC because projects have constant risk and target debt to value ratios.
• C) Flow-to-equity, because of constant risk and the knowledge that managers think in terms of optimal debt to equity ratios.
• D) Both APV because debt levels are unknown in future years; and WACC because projects have constant risk and target debt to value ratios.
• E) Both WACC because projects have constant risk and target debt to value ratios; and Flow-to-equity, because of constant risk and the knowledge that managers think in terms of optimal debt to equity ratios.

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Definitions:

Fish

Aquatic vertebrate animals that live in water, breathe using gills, and typically have fins and scales.

Pigs

Domesticated animals of the species Sus scrofa, widely kept for their meat (pork).

Sheep

Domesticated ruminant mammals, typically bred for their wool, meat, and milk.

RNAi

A biological process in which RNA molecules inhibit gene expression or translation by neutralizing targeted mRNA molecules.