The Value of Resources Used in an Investment Project Should

question 47

Multiple Choice

The value of resources used in an investment project should be measured in terms of their

• A)acquisition cost
• B)historical cost
• C)opportunity cost
• D)depreciated cost

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Definitions:

Discount Rate

The interest rate charged to commercial banks and other depository institutions for loans received from a central bank's discount window; or alternatively, used in discounted cash flow (DCF) analysis to present value future cash flows.

Present Value

The immediate value of a future amount of money or stream of payments, given a set rate of return.

Annuity

An investment vehicle that disburses a fixed series of payments to an individual, typically serving as an income provision for those who have retired.

Discount Rates

The interest rate used to discount future cash flows to their present values in order to evaluate investments or projects.