The Salvage Value of New Equipment Should Not Be Considered

question 338

True/False

The salvage value of new equipment should not be considered when using the internal rate of return method to evaluate a project.

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Definitions:

Promised Yield

The return that a bond issuer agrees to pay to the bondholder until maturity, expressed as an annual percentage.

Coupon Rate

The annual interest rate paid by a bond issuer to the bondholder, usually expressed as a percentage of the bond's face value.

Duration

A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates, often expressed in years.

Perpetuities

A type of annuity that receives an infinite series of identical cash flows with no end.