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Future payments must be discounted in a bond valuation in order to take into account the:
The process of accounting for time value of money is discounting.
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The discount rate is determined in advance for which of the following capital budgeting techniques?
In order to work with net present value, a discount rate must be calculated.
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Using the discounted cash flow method, estimate the cost of retained earnings for a firm with a stock price of $30, an estimated dividend at the end of the first year of $3 per share, and an expected growth rate of 10%.
$3/$30 + 10% = 20% Cost of retained earnings.
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The length of time required to recover the initial cash outlay of a capital project is determined by using the:
The payback method measures the time required to recover the initial investment.
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Which of the following statements is true regarding the payback method?
The payback method determines the number of years that it will take for a company to recoup or be paid back for its investment. The payback method does not consider the time value of money.
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Which of the following phrases could be used to describe the Discounted Cash Flow formula?
The Discounted Cash Flow formulas involving dividends, price, and growth is also known as the cost of retained earnings.
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