Which Method Directly Estimates the Change in Shareholder Wealth

question 47

Multiple Choice

Which method directly estimates the change in shareholder wealth?

• A) Payback
• B) IRR
• C) NPV
• D) PI

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Definitions:

Absorption Costing

An evaluation technique that assimilates all production costs, covering direct materials, direct labor, and variable and fixed overheads, into the price of a product.

Net Operating Income

An indicator of a firm's profitability from standard operations, excluding non-operational income and expenses like taxes and interest.

Operations

The activities involved in running a business, production, or system effectively and efficiently.

Contribution Margin

It refers to the amount of revenue remaining after deducting variable costs, which can contribute to covering fixed costs and generating profit.