Describe the Strengths and Weaknesses of Selected-Response Tests

question 16

Essay

Describe the strengths and weaknesses of selected-response tests.

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Definitions:

Internal Rate of Return (IRR)

The discount rate at which the net present value of all cash flows (positive and negative) from a project or investment equals zero.

Weighted Average Cost of Capital (WACC)

WACC represents the average rate that a company is expected to pay to finance its assets, weighted by the proportion of debt and equity financing.

Terminal Value (TV)

Value of operations at the end of the explicit forecast period; it is equal to the present value of all free cash flows beyond the forecast period, discounted back to the end of the forecast period at the weighted average cost of capital.

Payback Period

The duration of time it takes for an investment to recoup its initial cost, often used to assess the risk or profitability of a project.