Asked by
Elian Reyes
on Dec 01, 2024Verified
The NPV and IRR derived from estimated cash flows for a capital budgeting project are:
A) essentially expected values or means.
B) likely to differ from the actual results of the project.
C) random variables with their own probability distributions.
D) All of the above
NPV
The calculation of the current value of all future cash flows generated by a project, after accounting for the initial capital expenditure.
IRR
Internal Rate of Return; a metric used in capital budgeting to estimate the profitability of potential investments.
Probability Distributions
A statistical function that describes all the possible values and likelihoods that a random variable can take within a given range.
- Recognize the significance of risk in projecting cash flows and its influence on capital budgeting determinations.
Verified Answer
ST
Learning Objectives
- Recognize the significance of risk in projecting cash flows and its influence on capital budgeting determinations.