The Two Alternative Approaches to Capital Budgeting Are the

question 4

Multiple Choice

The two alternative approaches to capital budgeting are the

• A) weighted average cost of capital and flow-to-equity.
• B) discounted cash flow and the flow-to-equity.
• C) weighted average cost of capital and net income.
• D) discounted cash flow and net income.

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Definitions:

Undiscounted Cash Flows

Cash flows that have not been adjusted for the time value of money, representing the gross amount of cash that is expected to be generated over time.

Historical Cost

Historical cost refers to the original monetary value of an asset for accounting purposes, not taking into account inflation adjustments or current market values.

Accumulated Depreciation

The total depreciation for a fixed asset that has been charged to expense since the asset was acquired and put into use.

Salvage Value

The estimated residual value of an asset at the end of its useful life, often used in calculating depreciation expense.