Use the Table for the Question(s)below

question 66

Multiple Choice

Use the table for the question(s) below.
Consider the following investment alternatives:
-Which alternative offers you the lowest effective rate of return?

• A)Investment A
• B)Investment B
• C)Investment C
• D)Investment D

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Definitions:

Straight-line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal yearly amounts.

Net Income

The comprehensive earnings of a corporation after expenses and taxes have been taken away from its revenues.

Discount Rate

A rate used to determine the present value of future cash flows, reflecting the time value of money and risk of the cash flows.

Profitability Index

A calculation that determines the relative profitability of an investment, indicating the value created per unit of investment.