In Capital Budgeting and Cost of Capital Analyses,the Firm Should

question 109

True/False

In capital budgeting and cost of capital analyses,the firm should always consider retained earnings as the first source of capital,because this is a free source of funding to the firm.

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Definitions:

Invested

To be invested refers to the allocation of resources, such as capital or time, into a particular venture, asset, or effort with the expectation of generating a future return.

Present Value Equation

A mathematical formula used to determine the current value of a future amount of money or stream of cash flows given a specific rate of return.

FV

Future Value, the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today.

Compound Interest

Interest calculated on the initial principal of a deposit or loan, as well as on the accumulated interest from previous periods.