For Net Present Value Calculations, the Rate of Return That

question 48

Multiple Choice

For net present value calculations, the rate of return that one could earn by investing in another project with similar risk is known as the:

• A) real interest rate.
• B) nominal interest rate.
• C) prime interest rate.
• D) opportunity cost of capital.

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Definitions:

Cash Cycle

The time period between the outlay of cash for the production process and the collection of cash from customers.

Fixed Asset Requirements

The necessary investments in long-term assets like property, plant, and equipment that a business needs to carry out its operations.

Return On Assets

A financial ratio indicating how profitable a company is relative to its total assets, calculated by dividing net income by total assets.

Operating Cycle

The duration between a company's purchase of inventory and the collection of accounts receivable generated from sales of that inventory.