Which of the Following Methods for Evaluating Capital Investment Proposals

question 88

Multiple Choice

Which of the following methods 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:

Excess Cash

The amount of cash holdings that exceed the normal operational needs of a company.

Reverse Split

A corporate action which consolidates the number of existing shares of stock into fewer, proportionately more valuable, shares.

Shares Outstanding

Shares outstanding refers to the total number of shares of a company's stock that are currently owned by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.

Long-Term Payout Ratio

The proportion of earnings paid out as dividends to shareholders over an extended period, often used as a measure of a company's dividend policy stability.