The Net Present Value Method Assumes That the Cash Flows

question 154

Multiple Choice

The net present value method assumes that the cash flows over the life of the project are reinvested at:

• A)the project's internal rate of return.
• B)the risk-free rate.
• C)the market capitalization rate.
• D)the firm's cost of capital.

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Definitions:

Predetermined Overhead Rate

A rate calculated by dividing estimated overhead costs by an allocation base, used to allocate overhead to products or services.

Direct Labour-Hours

The amount of time dedicated by employees for the manufacture of products, directly impacting production costs and efficiency.

Overhead Applied

Overhead applied refers to the allocation of overhead costs to specific jobs or production units based on a predetermined rate or basis.

Job-order Costing System

A costing method that assigns costs to specific batches or lots of products, often tailor-made for customers.