The Value of Money

question 9

Multiple Choice

The value of money:

• A)increases when prices rise
• B)increases when the price of bonds falls
• C)increases when prices fall
• D)decreases when prices fall

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Definitions:

Payback Method

A capital budgeting technique that estimates the time required to recoup the initial investment in a project.

Cash Flows

The inflows and outflows of cash and cash equivalents, representing the operating, investing, and financing activities of an entity.

Net Present Value

The difference between the present value of an investment project’s cash inflows and the present value of its cash outflows.

Internal Rate

Internal Rate, often referred to as Internal Rate of Return (IRR), is the rate of growth a project is expected to generate, used in capital budgeting to estimate the profitability of potential investments.