Asked by Kristie Smith on May 26, 2024
Verified
A capital budgeting technique which takes into consideration the time value of money is the
A) annual rate of return approach.
B) return on stockholders' equity approach.
C) payback approach.
D) net present value method.
Capital Budgeting Technique
Methods used to evaluate and select long-term investments based on potential for profit and alignment with strategic goals, such as NPV or IRR.
Time Value
The principle that current money holds greater value than an identical sum in the future because of its earning potential.
Net Present Value Method
A method used in capital budgeting to evaluate the profitability of an investment or project by calculating the present value of expected future cash flows.
- Identify how the time value of money influences techniques in capital budgeting.
- Identify and apply different approaches to capital budgeting including payback, net present value, and internal rate of return methods.
Verified Answer
Learning Objectives
- Identify how the time value of money influences techniques in capital budgeting.
- Identify and apply different approaches to capital budgeting including payback, net present value, and internal rate of return methods.
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