When Companies Do Not Want To,or Find It Too Costly

question 116

Multiple Choice

When companies do not want to,or find it too costly to,use market prices,they typically use ________ prices,even though suboptimal decisions may occur.

• A)full-cost
• B)long-run cost
• C)short-run average cost
• D)average-cost

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Definitions:

Payback Method

A simplistic financial analysis tool used to determine the time required for the earnings from an investment to repay the initial investment cost.

NPV Profile

A graphical representation showing the relationship between the net present value (NPV) of a project and various discount rates, helping to analyze the investment's sensitivity to changes in cost of capital.

MIRR

Modified Internal Rate of Return, a financial metric used to assess the profitability of investments, adjusting for different cash inflow and outflow timings.

IRR Method

A financial analysis tool used to evaluate the profitability of investments based on the internal rate of return, which calculates the rate at which the net present value of all cash flows is zero.