Which of the Following Is Used as the Equation's Numerator

question 9

Multiple Choice

Which of the following is used as the equation's numerator when computing the payback period for a capital asset with equal annual net cash inflows?

• A)Expected annual cash inflow
• B)Total cash inflows
• C)Amount invested
• D)Net cash outflow

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Definitions:

Future Dividends

Expected payments made by a corporation to its shareholders out of its future earnings.

Risk Premium

The extra return expected for taking on additional risk, over and above the risk-free rate of return.

Firm's Risk

The total risk associated with running a business, including both systematic and unsystematic risks.

Market Risk

The risk of losses in investments due to market variables such as price changes, interest rates, or currency exchange rates.