How is the cost of capital relevant in capital budgeting decisions
Answers
Explanation:
In calculating the net present value of the expected future cash flows from the project, the cost of capital is used as the rate of discounting. Therefore, cost of capital acts as a standard for allocating the firm's investible funds in the most optimum manner.
Answer:
Capital Budgeting Decisions:
ADVERTISEMENTS: In calculating the net present value of the expected future cash flows from the project, the cost of capital is used as the rate of discounting. Therefore, cost of capital acts as a standard for allocating the firm's investible funds in the most optimum manner.
Explanation:
The cost of capital relevant to capital budgeting decision. The facts regarding this are described below:
- Long-term capital expenditures are expected to be received beyond a year in terms of cash flow are called capital budgeting which is a decision making process in a company plans.
- Here ,welfare investment is included in the investment decisions.
- Future cash flows of the investment avenues can be converted into present value by discounting it and it can only be possible with the help in evaluating the investment option.
- The company uses the source of finances and according to that the decisions are taken with the help of capital budgeting decisions.
Mark me as the brainliest