The Discount Rate That Makes the Net Present Value of an Investment

question 83

Multiple Choice

The discount rate that makes the net present value of an investment exactly equal to zero is called the:

• A)external rate of return.
• B)internal rate of return.
• C)average accounting return.
• D)profitability index.
• E)equalizer.

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Definitions:

Variable Costing

An accounting method that includes only variable costs—those that change with production levels—in the cost of goods sold and inventory valuation.

Unit Product Cost

The total cost associated with producing one unit of a product, including direct materials, direct labor, and allocated overhead.

Segmented Income Statement

An income statement that separates costs and revenues into different segments, departments, or divisions of a business.

Contribution Approach

An income statement format that organizes costs by their behavior. Costs are separated into variable and fixed categories rather than being separated into product and period costs for external reporting purposes.