The Benefit-Cost Ratio Is Defined as the Ratio of

question 70

Multiple Choice

The benefit-cost ratio is defined as the ratio of

• A)net present value cash flows to initial investment.
• B)present value of cash flows to initial investment.
• C)net present value of cash flows to IRR.
• D)present value of cash flows to IRR.

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Definitions:

Desired Profit

The amount of financial gain a company aims to achieve from its operations, often used in setting prices and targets.

Period Cost

Costs that are not directly tied to the production process and are expensed in the period in which they occur.

Differential Cost

The difference in cost between two alternative decisions or changes in output levels.

Sunk Cost

Sunk cost represents money already spent and permanently lost, which cannot be recovered and should not influence future financial decisions.