Which of the Following Capital Budgeting Methods Calculates the Expected

question 122

Multiple Choice

Which of the following capital budgeting methods calculates the expected monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time using the required rate of return?

• A)Net present value method
• B)Accrual accounting rate-of-return method
• C)Payback method
• D)Sensitivity method

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Definitions:

Output Effect

The possibility that when the price of the first of a pair of substitute resources falls, the quantity demanded of both resources will rise because the reduction in the price of the first resource so greatly reduces production costs that the volume of output created with the two resources increases by so much that the quantity demanded of the second resource increases even after accounting for the substitution effect.

Pasture Land

This term describes land that is used for the grazing of livestock such as cows and sheep.

Productivity

The measure of how efficiently goods and services are produced, often assessed by the output per unit of input, such as labor or capital.

Graze Cattle

The process of feeding cattle by allowing them to roam and eat grass or other ground vegetation.