Which Method for Evaluating Capital Investment Proposals Reduces the Expected

question 48

Multiple Choice

Which method for evaluating capital investment proposals reduces the expected future net cash flows originating from the proposals to their present values and computes a net present value?

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

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Definitions:

Inspection Cost

The cost associated with ensuring products meet quality standards, including the labor and equipment used for inspection.

Units Produced

The total number of completed products that come out of a manufacturing process during a specific period.

Contribution Format Income Statement

An income statement layout that separates variable costs from fixed costs, showing the contribution margin and highlighting how sales revenue covers variable costs and fixed costs to determine net income.

Break-even Point

This refers to the level of production or sales volume at which total revenues match total expenses, resulting in no net profit or loss.