Solution:
Average rate of return which is required by all investors of company is classified as weighted average cost of capital. The weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is proportionately weighted. All sources of capital, including common stock, preferred stock, bonds, and any other long-term debt, are included in a WACC calculation.

Solution:
The decision to invest a substantial sum in any business venture expecting to earn a minimum return is called an investment decision. The Investment Decision relates to the decision made by the investors or the top level management with respect to the amount of funds to be deployed in the investment opportunities.

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Solution:
In calculation of net cash flow, depreciation and amortization are treated as non-cash charges. A non-cash charge is a write-down or accounting expense that does not involve a cash payment.

Solution:
Type of stock in which dividends are tied to any particular part of a firm is classified as tracking stock. A tracking stock is an equity issued by a parent company that tracks the financial performance of a particular division. Tracking stocks trade in the open market separately from the parent company's stock. Gains or losses in the tracking stock price are based only on the division's performance

Solution:
Market required return is subtracted from risk free rate which is used to calculate market risk premium. The market risk premium is the difference between the expected return on a market portfolio and the risk-free rate. The market risk premium is equal to the slope of the security market line (SML), a graphical representation of the capital asset pricing model (CAPM).

Solution:
Purchase cost of assets over its useful life is classified as depreciation. Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life and is used to account for declines in value. Businesses depreciate long-term assets for both tax and accounting purposes.