The cost of capital method attempts to adjust future cash flows for changes in the cost of capital as the firm reduces its outstanding debt.

Question

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The cost of capital method adjusts future cash flows for changes in the cost of capital as the firm reduces its outstanding debt. This method is used to determine the present value of future cash flows by considering the time value of money and the risk of the investment. It takes into account the cost of debt and equity and adjusts the cash flows accordingly.

The Cost of Capital Method Attempts to Adjust Future Cash