Use the Rule of 72 to Determine How Long It

question 55

Multiple Choice

Use the rule of 72 to determine how long it takes for real GDP to double if real GDP grows at 3% per year.

• A) 12 years
• B) 24 years
• C) 36 years
• D) 72 years

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Definitions:

Capital Budgeting

The process of evaluating and selecting long-term investments compatible with the firm's goal of wealth maximization.

NPV

Short for Net Present Value, which is a financial metric used to evaluate the profitability of an investment or project, considering the time value of money.

IRR

Internal Rate of Return - a financial metric used to evaluate the profitability of potential investments, representing the discount rate that makes the net present value of all cash flows from a particular project equal to zero.

Salvage Value

The estimated residual value of an asset at the end of its useful life, often considered in depreciation calculations and asset disposal decisions.