Financial & Managerial Accounting
Financial & Managerial Accounting
18th Edition
ISBN: 9781259692406
Author: Jan Williams, Susan Haka, Mark S Bettner, Joseph V Carcello
Publisher: McGraw-Hill Education
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Chapter 26, Problem 1STQ
To determine

State the capital budgeting measure that requires the discounting of an investment’s future cash flows.

Expert Solution & Answer
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Answer to Problem 1STQ

b. Net present value.

Explanation of Solution

Discounted cash flow:

Discounted cash flow is a process which is used to evaluate the value of an investment based on its future cash flows. The Discounted cash flow analysis finds that the present value of the expected future cash flows uses a discount rate. Hence to calculate the potential investment, the present value estimate is used.

From the above explanation it is clear that option a, c and d are incorrect only option b is correct.

Conclusion

Hence, the correct option is option b.

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Chapter 26 Solutions

Financial & Managerial Accounting

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