The Method of Evaluating Long-Term Capital Investments That Finds the Number

question 104

Multiple Choice

The method of evaluating long-term capital investments that finds the number of years it will take before the cash inflows from a project equal the amount of the original investment is the

• A) Payback method
• B) Net present value method
• C) Internal rate of return method
• D) Accounting rate of return method

---

Definitions:

Demand For Loanable Funds

The desire or willingness of individuals or businesses to borrow money, driven by the interest rate and economic activity.

Equilibrium Interest Rate

The interest rate at which the demand for money in an economy equals the supply of money, leading to an equilibrium in the money market.

Equilibrium Level Of Saving

The amount of saving that occurs when households' intentions to save match actual savings, often equated to investment in macroeconomics.

Government Debt

The total amount of money owed by the central and local governments of a country, resulting from borrowing to cover budget deficits.