What Are the Two Main Forms of Retirement Plans

question 72

Short Answer

What are the two main forms of retirement plans?

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Definitions:

Zero Cost of Capital

A theoretical situation where a company or project does not incur any cost to obtain and use capital, implying no interest expenses for debt or dividend expectations for equity.

Net Present Value (NPV)

Net Present Value is a method used in capital budgeting to evaluate the profitability of an investment or project, calculating the present value of all cash inflows and outflows using a specified discount rate.

Internal Rate of Return (IRR)

The discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero, used in capital budgeting to estimate the profitability of potential investments.

Payback Method

An investment appraisal technique that calculates the time needed for an investment to generate cash flows sufficient to recover the initial cost.