Match each definition that follows with the term (a-f) it defines.
-Uses present value concepts to compute the rate of return on an investment from a capital investment proposal based on its expected net cash flows

Question

Quizplus · Accepted Answer

The definition matches the Internal rate of return method, which is the technique that uses present value concepts to compute the rate of return on an investment from a capital investment proposal based on its expected net cash flows.

A) Capital rationing refers to the situation where a company has limited funds and must allocate its capital resources among various investment opportunities.

B) An annuity is a series of equal payments made or received at regular intervals.

C) Capital investment analysis is the process of evaluating potential investments in order to determine which ones are likely to provide the greatest return on investment.

E) The payback period is the length of time it takes for an investment to generate enough cash flow to cover the initial investment cost.

F) The accounting rate of return is a measure of the profitability of an investment, calculated by dividing an investment's average annual profits by its average investment cost.

Match Each Definition That Follows with the Term (A-F) It