Which of the Following Methods Assumes a Reinvestment Rate Equal

question 13

Multiple Choice

Which of the following methods assumes a reinvestment rate equal to the discount rate?

• A)payback
• B)accounting rate of return
• C)net present value
• D)internal rate of return

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Definitions:

Operating Leverage

A measure of how sensitive a company's operating income is to a change in its sales volumes, reflecting the proportion of fixed costs in a company's cost structure.

Financial Break-Even

The point at which total revenues equal total costs and expenses, resulting in neither profit nor loss.

Salvage Value

The estimated residual value of an asset at the end of its useful life.

Cash Break-Even

The point at which a business's cash inflows equal its cash outflows, excluding financing or investment income.