A Project Has an Initial Cost of $27,400 and a Market

question 69

Multiple Choice

A project has an initial cost of $27,400 and a market value of $32,600.What is the difference between these two values called?

• A)net present value
• B)internal return
• C)payback value
• D)profitability index
• E)discounted payback

Understand the role and implementation of data warehouses and data marts in decision-making processes.

Realize the importance of knowledge management and intellectual capital in leveraging organizational performance.

Understand and calculate the payback period for investment projects.

Identify and evaluate the profitability index and internal rate of return as investment appraisal methods.

---

Definitions:

Risk-Free Rate

The Risk-Free Rate is the theoretical rate of return on an investment with zero risk, typically represented by the yield on government securities like U.S. Treasury bills.

Market Risk Premium

The additional return expected by investors for taking on the increased risk of investing in the stock market over a risk-free investment.

Beta

A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.

Dividend Growth Model

A valuation model that estimates the value of a company's stock based on its future dividend payments and growth rate.