To Calculate the Change in the Value of Inventories for the Investment

question 18

Multiple Choice

To calculate the change in the value of inventories for the investment component of GDP, one should use their

• A)current market value.
• B)value at the time the goods are sold and removed from inventory.
• C)cost of production minus the costs of labour and capital.
• D)market value at the time they were produced.
• E)cost of production at the time they were produced.

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Definitions:

Internal Rate

Often referred to as Internal Rate of Return (IRR), it is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

Profitability Index

A financial tool used to determine the desirability of an investment by dividing the present value of future cash flows by the initial investment cost.

Internal Rate of Return

A metric used in capital budgeting to estimate the profitability of potential investments.

Firm's Cost

The total expenses incurred by a business in the process of producing and selling its goods or services, including both fixed and variable costs.