- The true economic yield produced by an asset is summarized by the asset's: internal rate of return.
- The internal rate of return on an asset can be calculated: by finding a discount rate that yields a zero net present value.
What is not included in capital budgeting analysis?
- However, cash flow payments made after the payback period are not included in the analysis.
- In the aforementioned example, the investment continues to produce cash flows for a further four years after the initial six years have passed.
- The analysis excludes the value of these four cash flows.
Which is not a part of capital budget?
- Making the best decisions is aided by capital budgeting.
- It comprises decisions regarding expansion plans, mergers, and replacements but excludes those pertaining to inventory.
5 Methods for Capital Budgeting -
- Internal Rate of Return.
- Net Present Value.
- Profitability Index.
- Accounting Rate of Return.
- Payback Period
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