The Flow-To-Equity Approach to Capital Budgeting Is a Three Step

question 36

Multiple Choice

The flow-to-equity approach to capital budgeting is a three step process of:

• A) calculating the levered cash flow, the cost of equity capital for a levered firm, then adding the interest expense when the cashflows are discounted.
• B) calculating the unlevered cash flow, the cost of equity capital for a levered firm, and then discounting the unlevered cash flows.
• C) calculating the levered cash flow after interest expense, the cost of equity capital for a levered firm, and then discounting the levered cash flows by the cost of equity capital.
• D) calculating the levered cash flow after interest expense, the cost of equity capital for a levered firm, and then discounting the levered cash flows at the risk free rate.

---

Definitions:

Age Group

A range of ages that individuals fall into which share similar demographic, physical, or psychological characteristics.

Partner

Often refers to a spouse or significant other in a romantic or committed relationship.

Depression

A mental health disorder characterized by persistently depressed mood or loss of interest in activities, causing significant impairment in daily life.

Memory Problems

Difficulties in remembering information, which can range from mild forgetfulness to severe impairments affecting daily life.