Market-Value Balance Sheets Differ from Book-Value Balance Sheets in That

question 43

Multiple Choice

Market-value balance sheets differ from book-value balance sheets in that market values:

• A) are higher than book values.
• B) are lower than book values.
• C) reflect GAAP accounting.
• D) reflect investors' expectations.

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Definitions:

Average Return

A statistical measure representing the mean outcome or yield from an investment over a given period of time.

NPV

Net Present Value; a calculation used to determine the value of an investment by subtracting the present values of cash outflows (including initial cost) from the present values of cash inflows over a period of time.

IRR

Internal Rate of Return; the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

Cost of Capital

The required return necessary to make a capital budgeting project, such as building a new plant, worthwhile.