The Discount Rate That Makes the Net Present Value of an Investment

question 83

Multiple Choice

The discount rate that makes the net present value of an investment exactly equal to zero is called the:

• A)external rate of return.
• B)internal rate of return.
• C)average accounting return.
• D)profitability index.
• E)equalizer.

---

Definitions:

Overapplied

This term relates to situations where the allocated or applied costs in cost accounting exceed the actual costs incurred.

Manufacturing Overhead

All indirect costs related to the production process, including expenses for equipment maintenance, factory rent, and utilities.

T-account

A ledger account representation that outlines the debits and credits for specific transactions, helping accountants visualize the effects on each account.

Insurance Cost

The expense incurred from purchasing insurance to protect against risks.