In capital budgeting, a technique which is based upon discounted cash flow is classified as ___________?
Correct answer: A. net present value method
- A. net present value method
- B. net future value method
- C. net capital budgeting method
- D. net equity budgeting method
Explanation
The net present value method is a discounted-cash-flow technique because it discounts expected future cash flows back to their present value using a required rate of return. The other listed methods are not standard capital-budgeting techniques.
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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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