In the Present Value Break-Even,the EAC Is Used To

question 1

Multiple Choice

In the present value break-even,the EAC is used to:

• A)determine the salvage value of the initial fixed asset investment.
• B)allocate depreciation over the life of the project.
• C)allocate the initial investment at its opportunity cost over the life of the project.
• D)determine the contribution margin to fixed costs ratio.
• E)allocate the opportunity and erosion costs over the life of the project.

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Definitions:

2 ½ Years

A time period of two and a half years.

Compounded Annually

The process of adding interest to the principal sum of a loan or deposit once per year, resulting in an increase in the amount of interest earned over time.

Discount Rate

The interest rate used to determine the present value of future cash flows.

Promissory Notes

Written promises to pay a specified sum of money to a specified person at a specified time.