All Else Being Equal, a Company Would Choose to Invest

question 110

Multiple Choice

All else being equal, a company would choose to invest in a capital asset if which of the following is true?

• A)If the payback period equals the amount invested
• B)If the expected accounting rate of return is less than the required rate of return
• C)If the expected accounting rate of return is greater than the required rate of return
• D)If the average amount invested is equal to the net cash inflows

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Definitions:

Amortized

The process of gradually paying off debt through a series of fixed payments that include both interest and a portion of the principal.

Compounded Monthly

Refers to the process where interest is calculated and added to the principal sum every month, resulting in interest earning interest.

Amortized

The process of gradually reducing a debt through periodic payments of both principal and interest over a set period of time.

Compounded Semi-annually

Interest calculated twice a year on the initial principal and accumulated interest from previous periods.