Multicollinearity Is When…

question 5

Multiple Choice

Multicollinearity is when…

• A) there are very strong relationships between our predictor variables.
• B) there are very strong relationships between our predictor variables and the outcome variable.
• C) there are very weak relationships between our predictor variables.
• D) there are very weak relationships between our predictor variables and the outcome variable.

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Definitions:

Net Present Value

A financial metric that calculates the present value of all future cash flows associated with an investment, minus the initial investment cost.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return.

Unequal Lives

A term used in capital budgeting to describe projects or investments with different durations.

Replacement Chain Method

A capital budgeting technique that compares different investment projects with unequal lifespans by calculating their equivalent annual cost.