The Delta Mare Co

question 357

Multiple Choice

The Delta Mare Co. has received requests from each of the departments within the company for capital investment funds for next year. The management of Delta Mare decides to allocate the
Available funds based on the net present value (NPV) of each proposal starting with the highest
NPV first. Management is following a practice known as _____ rationing.

• A) net present value
• B) rate of return
• C) capital improvement
• D) soft
• E) hard

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Definitions:

Car Loan

A sum of money borrowed to purchase a car that is repaid with interest over a set period of time.

Effective Annual Rate

The interest rate on an investment or loan that is adjusted for compounding over a specified period, showing the true annual return.

Semi-Annually Compounded

A financial term where interest is added to the principal amount of an investment or loan twice a year, resulting in compound growth.

Semi-Annually Compounded

Interest or finance charges are applied to the principal sum twice a year, causing the investment or loan to grow at a faster rate than simple annual compounding.