Which One of These Is a Requirement When Computing the Net

question 61

Multiple Choice

Which one of these is a requirement when computing the net present value of a capital project?

• A)The discount rate used must be a nominal rate.
• B)The discount rate must be stated in real terms.
• C)Nominal cash flows must be discounted using a real rate.
• D)Real cash flows must be converted to nominal cash flows.
• E)Real cash flows must be discounted using a real rate.

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Definitions:

Central Bank Policies

Refers to the actions and strategies employed by a nation's central bank to control the money supply, manage inflation, and stabilize the currency.

Savers

Individuals or entities that allocate a portion of their current income or resources for future use or investment.

Pure Profit

The excess amount remaining after all operational, fixed, and variable costs have been subtracted from total revenue.

Accounting Profits

The difference between total revenue and explicit costs of a business, as calculated for financial reporting and tax purposes.