Capital budgeting decisions are analyzed with help of weighted average and for this purpose____________?
Correct answer: C. Cost of capital is used
- A. Component cost is used
- B. Common stock value is used
- C. Cost of capital is used
- D. Asset valuation is used
Explanation
Capital budgeting decisions are often evaluated using the weighted average cost of capital as the required return or discount rate. It combines the component costs of debt, preferred stock, and common equity.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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