The Method of Analyzing Capital Investment Proposals That Divides the Estimated

question 47

Multiple Choice

The method of analyzing capital investment proposals that divides the estimated average annual income by the average investment is the

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

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Definitions:

Perfect Competitor's Demand Curve

A horizontal line reflecting a perfectly elastic demand situation where the firm can sell any quantity at the prevailing market price.

Perfectly Elastic

Describes a situation where the quantity demanded or supplied responds infinitely or extremely to changes in price.

Highly Inelastic

Describes demand that is hardly responsive to changes in price, typically for necessities where consumption does not decrease significantly with a price increase.

Total Profit

The overall financial gain made by a business after subtracting all expenses from total revenue.