Use of ________ in Evaluating Capital Investment Projects Will Promote

question 142

Multiple Choice

Use of ________ in evaluating capital investment projects will promote goal congruence and lead to better decisions than using ________.

• A) return on investment; economic profit
• B) economic profit; contribution by segment
• C) contribution controllable by division manager; contribution by segment
• D) economic profit, return on investment

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Definitions:

Equation of Exchange

The equation of exchange is an economic formula relating the supply of money in an economy to the velocity of money, price level, and an index of expenditures.

Velocity of Money

The rate at which money circulates in the economy, calculated as the ratio of nominal GDP to the money supply.

Real GDP

Real Gross Domestic Product, which adjusts the total value of all produced goods and services within an economy in a year for the effects of inflation, showing the real terms of economic output.

Equation of Exchange

An economic equation that relates the quantity of money, its velocity, and the price level of goods and services to the economy's output of goods and services.