If Measurement Errors Are Truly Random, Then They Should

question 2

Multiple Choice

If measurement errors are truly random, then they should

• A) never occur.
• B) not affect the reliability of a measure.
• C) not attenuate the validity of a measure.
• D) sum to zero.

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Definitions:

Profitability Index

A capital budgeting tool used to measure the relative profitability of an investment, calculated by dividing the present value of future cash flows by the initial investment cost.

Accounting Rate

The accounting rate, or rate of return, measures the profitability of investments or projects, expressed as a percentage.

Discounted Cash Flows

A valuation method used to estimate the value of an investment based on its expected future cash flows, adjusted for time value of money.

Initial Cost

Typically refers to the acquisition price of an asset or investment, including all expenses incurred to bring it to its intended use.