Cost-Benefit Analysis Attempts to

question 117

Multiple Choice

Cost-benefit analysis attempts to

• A)compare the real worth, rather than the market values, of various goods and services.
• B)compare the relative desirability of alternative distributions of income.
• C)determine whether it is better to cut government expenditures or reduce taxes.
• D)compare the benefits and costs associated with any economic project or activity.

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Definitions:

Discount Rate

The interest rate charged to commercial banks and other depository institutions for loans received from the Federal Reserve's discount window; also used in discounted cash flow (DCF) analysis to determine present value.

NPV

A strategy employed in capital budgeting, Net Present Value is instrumental in determining the financial viability of an investment or project.

Projected Cash Flows

Estimates of the amounts of money a company expects to receive and pay out over a certain period in the future.

Market Test

An evaluation conducted to gauge the potential success of a product or service in the market, often via limited release or sample group feedback.