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Suppose you invest $20,000 by purchasing 200 shares of Abbott Labs (ABT) at $50 per share,200 shares of Lowes (LOW) at $30 per share,and 100 shares of Ball Corporation (BLL) at $40 per share.
-Suppose over the next year Ball has a return of 12.5%,Lowes has a return of 20%,and Abbott Labs has a return of -10%.The return on your portfolio over the year is:
Net Present Value
A method used in capital budgeting to evaluate the profitability of an investment by calculating the difference between the present value of cash inflows and outflows.
Internal Rate of Return
A metric used in capital budgeting to estimate the profitability of potential investments, calculated as the discount rate that makes the net present value of all cash flows from a particular project equal to zero.
Time Value
The principle that money currently in hand is valued higher than an identical amount received in the future, owing to its capacity to generate earnings.
Accounting Rate of Return
A financial ratio that measures the expected profitability of an investment, calculated by dividing the average annual profit by the initial investment cost.
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