If 2016 Is the Base Year and the Price Index

question 39

Multiple Choice

If 2016 is the base year and the price index in 2017 is 90, prices in 2017 are _____ from prices in 2016.

• A) 1 percent higher
• B) 10 percent higher
• C) 10 percent lower
• D) 9 percent higher
• E) unchanged

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Definitions:

Investment

The action or process of investing money for profit or material result.

Internal Rate of Return

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.

Independent Projects

Projects in a company that can be selected or rejected independently of one another, without affecting the profitability or potential of other projects.

Conventional Cash Flows

A series of net income figures expected to be generated by an investment, starting with a negative cash flow at the beginning (investment outlay), followed by a series of positive cash flows.