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In Computing the Net Present Value of an Investment in Equipment

question 82

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In computing the net present value of an investment in equipment, the required investment and its residual value should be subtracted from the present value of all future cash inflows.


Definitions:

Reserve Ratio

The reserve ratio is the fraction of deposits that a bank is required to hold in reserve and not lend out, set by the central bank to control the money supply.

Money Multiplier

A concept that describes the amount of money that banks can generate with each dollar of reserves.

Percent

A mathematical term describing one hundredth of a particular quantity; a unit of proportion or rate expressed as a fraction of 100.

Reserves

Funds or assets that banks must hold either in their own vaults or on deposit with a central bank, to meet expected withdrawal demands or regulatory requirements.

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