Question

The capital budgeting method that takes into account both the size of the original investment and the discounted cash flows is the Group of answer choices

Answer 1

The capital budgeting method that takes into account both the size of the original investment and the discounted cash flows is the Net Present Value (NPV) method. NPV is calculated by subtracting the initial investment from the present value of the expected cash flows.

Step-by-step explanation:

The capital budgeting method that takes into account both the size of the original investment and the discounted cash flows is the Net Present Value (NPV) method.

NPV is calculated by subtracting the initial investment from the present value of the expected cash flows. If the resulting NPV is positive, the investment is considered profitable. If it is negative, the investment is not considered financially viable. For example, if a project requires an initial investment of $100,000 and the expected cash flows have a present value of $120,000, the NPV would be $20,000. This indicates that the project is profitable as the present value of the cash flows exceeds the initial investment.

Answer 2

Option D (profitability index) is the correct choice.

Step-by-step explanation:

Options aren't mentioned in the issue above. Please find the full query attachment here.

Capital budgeting seems to be the mechanism whereby the creditors assess the value of a future investment project. This corresponds to something like the timeframe by which the planned project can produce adequate income to regain the original investment.

The 3 most prevalent frameworks to contractor choosing are given below:

• Payback period.
• Net present value.
• Internal rate of return.

Some other choices have no relation with the specified scenario. So that the option here is just the appropriate ones.