The Most Commonly Used Methods in the Evaluation of Capital

question 27

True/False

The most commonly used methods in the evaluation of capital investment proposals are net present value method,payback period method,and the accounting rate-of-return method.

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Definitions:

Elastic Product Demand

A situation where the demand for a product is sensitive to changes in price, meaning small price changes can cause large changes in quantity demanded.

Economic Profits

Profits that exceed the opportunity costs of all resources employed by the firm, reflecting earnings above the normal expected return.

Inputs Prices

The cost of the resources used in the production process, including raw materials, labor, and overhead.

Labor and Capital

Labor and capital are the two main factors of production; labor refers to human work, while capital refers to assets used in producing goods and services.