A Method Which Involves Calculating the Annual Cash Flow of an Annuity

question 3

Multiple Choice

A method which involves calculating the annual cash flow of an annuity that has the same life as the project and whose present value equals the NPV of the project is:

• A)the chain of replacement method.
• B)the equivalent annual value method.
• C)the constant chain of replacement method.
• D)none of the given options.

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Definitions:

Capital Structure

The mix of debt and equity financing a company uses to fund its operations and growth.

Noncontrolling Interest

An ownership interest in a subsidiary not attributable, directly or indirectly, to the parent company, reflecting the equity in a subsidiary not owned by the parent.

Subsidiary

A company that is controlled by another company, known as a parent company, through the ownership of more than half of its voting stock.

Stock Dividend

A distribution of extra shares to shareholders, as opposed to a cash payment, as a form of dividend.