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When is WACC an appropriate discount rate when doing capital budgeting?
Wiki User
∙ 9y ago
WACC is appropriate where company is using differnt kind of capital like debt and equity for doing capital budgeting.
Wiki User
∙ 9y ago
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How do time value money concepts assist a company in making capital budgeting decisions?
Time value of Money is one of the indispensable concept through which the entire money market revolves. It is better understood that Re.1 today adds more value than Rs.10 tommorow, since the prospective earnings is uncertain and risky. So, Time value of money concept helps to discount that uncertainity and give probability for failures and success, thereby discounting the risk to a certain extent. Inspite, Capital Budgeting will assist how to evaluate the project, the returns, and at what rate it is to be reinvested, to cover the Cost of Capital. Discount rate is one of the input for evaluation, (formerly known to be the time value of money tool) will facilitate the company to take capital budgeting decisions. By doing this, the company may be in a position to decide on type of investments, tenure and the risk factor. Present value factor will bring the future cash flows to the present value by a loss factor.
Is profit maximization an appropriate for a business?
Profit maximization is the ONLY appropriate goal for a business. Even under a so-called "social responsibility" regime, a business only engages in such schemes because it thinks it can increase profits by doing so.
What is capital subscription?
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What is a budget labor cost?
Budgeted labour cost is an expected or standard labour cost to perform any activity. In budgeting process budgeted cost for doing every activity is calculated before so that it would be helpful in control or evaluation stage to check whether expenses are according to budget or not and if not then what's the reasons.
Why is WACC a more appropriate discount rate when doing capital budgeting?
WACC (Weighted Average Cost of Capital) is a more appropriate discount rate for capital budgeting because it reflects the overall cost of financing a project. It considers both the cost of debt and the cost of equity, taking into account the proportion of each in the capital structure. By using WACC as the discount rate, the project's cash flows are appropriately risk-adjusted and it helps in determining the economic viability of the investment.
Do all the answers in crosswords have to be capital?
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How do time value money concepts assist a company in making capital budgeting decisions?
Time value of Money is one of the indispensable concept through which the entire money market revolves. It is better understood that Re.1 today adds more value than Rs.10 tommorow, since the prospective earnings is uncertain and risky. So, Time value of money concept helps to discount that uncertainity and give probability for failures and success, thereby discounting the risk to a certain extent. Inspite, Capital Budgeting will assist how to evaluate the project, the returns, and at what rate it is to be reinvested, to cover the Cost of Capital. Discount rate is one of the input for evaluation, (formerly known to be the time value of money tool) will facilitate the company to take capital budgeting decisions. By doing this, the company may be in a position to decide on type of investments, tenure and the risk factor. Present value factor will bring the future cash flows to the present value by a loss factor.
Budgeting is about?
Budgeting is about doing the best you can do with your money. You budget so you will have enough money to pay your bills and know where you money is going.
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Bottom-up budgeting as applied to project management has advantages. It ensures the resources are getting to the people actually doing the work of the project.
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activity directed toward making or doing something and about budgeting in the company where you work.
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