Asked by Marquel WindyBoy on Jun 03, 2024
Verified
The net present value method can only be used in capital budgeting if the expected cash flows from a project are an equal amount each year.
Capital Budgeting
The process by which a business evaluates and plans for significant investments in projects, properties, or equipment.
Expected Cash Flows
Forecasts of the amounts, timing, and uncertainty of cash receipts and disbursements that a business anticipates.
- Understand the concept and application of net present value in capital budgeting.
Verified Answer
MY
Mikey YahnerJun 07, 2024
Final Answer :
False
Explanation :
The net present value method can be used in capital budgeting even if the expected cash flows from a project are not equal each year. However, if the cash flows are not equal, the calculation of the net present value will require a more complex formula or the use of financial software.
Learning Objectives
- Understand the concept and application of net present value in capital budgeting.
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