The Discount Rate Used in a Net Present Value Analysis

question 149

Multiple Choice

The discount rate used in a net present value analysis is the ________.

• A) rate of inflation
• B) rate of interest earned on a savings account
• C) required rate of return or the hurdle rate
• D) rate of interest charged for debt financing of an investment

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Definitions:

Marginal Productivity Theory

An economic theory that explains the determination of wages in the factor market, based on the productivity of the marginal unit of labor or other factors of production.

Human Capital

The collective skills, knowledge, or other intangible assets of individuals that can be used to create economic value.

Compensation of Employees

Payments and benefits received by employees in exchange for their labor, including wages, salaries, and benefits such as health insurance.

Total Income

The sum of all earnings or revenues received by an individual or organization before any deductions or taxes.