The Capital Budgeting Method That Takes into Account Both the Size

question 50

Multiple Choice

The capital budgeting method that takes into account both the size of the original investment and the discounted cash flows is the

• A) cash payback method.
• B) internal rate of return method.
• C) net present value method.
• D) profitability index.

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Definitions:

Coupon Rate

The interest rate on a bond that the issuer promises to pay annually or semi-annually to the bondholder.

Market Yield

The annual income on an investment divided by the market price of the investment, typically expressed as a percentage.

Premium

The amount by which the price of a security exceeds its principal amount or its value at issuance.

Discount

The reduction from the full amount or value of something, especially the price of a financial instrument or merchandise.