The Discount Rate That Makes the Net Present Value of an Investment

question 297

Multiple Choice

The discount rate that makes the net present value of an investment exactly equal to zero is called the:

• A) External rate of return.
• B) Internal rate of return.
• C) Average accounting return.
• D) Profitability index.
• E) Equalizer.

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Definitions:

Negative Exponential Distribution

A probability distribution used to model time between independent events that occur at a constant average rate.

Average Arrival Rate

The average rate at which entities (such as customers or products) arrive at a specific point or system over a defined period.

M/D/1

A notation in queue theory representing a system with a single server, where arrivals are Markovian (Poisson process), service times are deterministically fixed, and there is one server.

Constant Service Time

A condition in queuing theory where the time required to serve each customer is the same and does not vary.