The Two Methods That Consider the Time Value of Money

question 83

Multiple Choice

The two methods that consider the time value of money concept to analyze capital investment proposals are:

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

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Definitions:

GDP Deflator

An economic metric that converts output measured at current prices into constant-dollar output by adjusting for inflation.

Nominal GDP

Gross Domestic Product measured in current prices without adjusting for inflation, representing the total value of all goods and services produced over a specific time period within a country's borders.

Real GDP

The calculation of a nation's total economic production factoring in adjustments for price fluctuations, either inflationary or deflationary.

Growth Rate

The measure of the increase in a particular variable, such as GDP or population size, over a specific period of time, usually expressed as a percentage.