The Rate of Interest That Produces a Zero Net Present

question 92

Multiple Choice

The rate of interest that produces a zero net present value when a project's discounted cash operating advantage is netted against its discounted net investment is the

• A)cost of capital.
• B)discount rate.
• C)cutoff rate.
• D)internal rate of return.

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Definitions:

Minimum Acceptable Return

The minimum return on an investment that is required by an investor or fund manager, taking into account the risk of the investment.

Divisional Assets

Assets that are specific to, or used by, a particular division within a company.

Profit Margin

The ratio of net income earned to total revenue received by a business, indicating the efficiency of converting sales into profit.

Investment Turnover

A ratio measuring the efficiency of a company's use of its assets in generating sales revenue; calculated as sales divided by invested assets.