A Model in the Form of Y = β₀

question 56

Multiple Choice

A model in the form of y = β₀ + β₁z1 + β2z2 + . . . +βpzp + ε where each independent variable zj for j = 1, 2, . . ., p) is a function of xj . xj is known as the

• A) general linear model
• B) general curvilinear model
• C) multiplicative model
• D) multiplicative curvilinear model

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Definitions:

Net Present Value

A method used in capital budgeting to assess the profitability of an investment or project by calculating the difference between the present value of cash inflows and outflows.

Average Rate of Return

A monetary measurement for assessing an investment's profit efficiency, determined by dividing the yearly average profit by the cost of initial investment.

Cash Payback

A capital budgeting method that estimates the time required for an investment to generate cash flows sufficient to recover its initial cost.

Internal Rate of Return

A financial metric used in capital budgeting to estimate the profitability of potential investments, calculated as the discount rate that makes the net present value of all cash flows from a particular project equal to zero.