Under the Customary Approach, Firms Strive to Either Maintain Their

question 185

Multiple Choice

Under the customary approach, firms strive to either maintain their present capital structure or achieve some target structure. Both the current and the target structures must be based on:

• A)market values.
• B)book values.
• C)intrinsic values.
• D)future values.

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Definitions:

Cash Flow Estimate

An approximation of the amount of money expected to move in and out of a business within a specific time period.

Time Value of Money

Calculations involving the present and future values of money under the action of compound interest. Also called discounted cash flow.

Capital Budgeting Techniques

Methods used by companies to evaluate the profitability and financial feasibility of investment projects.

Incremental Cash Flows

The additional cash flow a project generates over the basic operation cash flows, used to analyze the profitability of a potential investment.