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Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977
Textbook Problem

Why are interest charges not deducted when a project's cash flows for use in a capital budgeting analysis are calculated?

Summary Introduction

To explain: The reason to not deduct the interest charges in capital budgeting’s cash flow calculations.

Introduction:

Capital Budgeting:

The process to evaluate an alternative based on the estimated future benefits and costs is known as capital budgeting. It is a management tool that is effective in decision making related to the business operations.

Explanation
  • The interest charges are used to compute the financing cost for debts.
  • This financing cost is considered for capital budgeting analysis...

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