Benefit-Cost Ratio Is Calculated By

question 62

Multiple Choice

Benefit-cost ratio is calculated by:

• A)dividing the present value of future net cash flows by the initial outlay.
• B)dividing the present value of cash flows by the working capital.
• C)dividing the present value of future net cash flows by the sum of initial outlay and the working capital.
• D)dividing the total cash flows by the initial outflow.

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Definitions:

Equity Financing

The method of raising capital by selling company shares to investors; in return, investors receive ownership interests in the company.

Capital Gains

The increase in value of an asset or investment above its purchase price, realized upon the sale of the asset.

Clientele Effect

A theory suggesting that the types of investors attracted to certain stocks or dividends policies can affect the stock price or policy sustainability.

Dividend Policy

Guidelines a company follows to decide how much it will pay out to shareholders in dividends.