Which of the Following Statements Is Correct

question 23

Multiple Choice

Which of the following statements is correct?

• A) Capital budgeting has long-term effects on firm leading the firm to lose some decision-making flexibility.
• B) Because asset expansion is fundamentally related to future sales,the decision to buy an asset involves an implicit sales forecast.
• C) Timing is important in capital budgeting.
• D) Capital budgeting is important because the acquisition of fixed assets typically involves substantial expenditures.
• E) All of the above are correct.

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Definitions:

Exercise Price

The price at which the holder of an option can buy (in case of a call option) or sell (in case of a put option) the underlying security or commodity.

Call Option

A financial contract that gives the buyer the right, but not the obligation, to buy an asset at a specified price within a certain time frame.

Exercise Price

The specified price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.

Risk-Free Rate

The return on investment of a risk-free asset, typically considered as government bonds, where the investor is assumed to have zero default risk.