Which of the Following Capital Budgeting Techniques Does Not Specifically

question 57

Multiple Choice

Which of the following capital budgeting techniques does not specifically use time value of money analysis?

• A)payback period
• B)net present value
• C)internal rate of return
• D)modified internal rate of return

Differentiate between discounting and compounding processes.

Make informed financial decisions regarding savings and investments.

Evaluate the effect of changing interest rates on financial outcomes.

Understand the concept of the time value of money.

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Definitions:

Nominal Rate

The interest rate before adjustments for inflation, as opposed to the real rate, which is adjusted for inflation.

Inflation

How quickly the average price of goods and services elevates, lessening the power to purchase.

APR

Annual Percentage Rate, the annual rate charged for borrowing or earned through an investment, which includes all fees and costs associated with the transaction.

Mortgage Rate

The interest rate charged on a mortgage loan, determined by the lender, which affects the monthly payments and total amount paid over the life of the loan.