An Estimate of an Asset's Value to the Company, Calculated

question 39

Multiple Choice

An estimate of an asset's value to the company, calculated by discounting the future cash flows from the investment at an appropriate rate and then subtracting the initial cost of the investment, is known as:

• A) Annual net cash flows.
• B) Rate of return on investment.
• C) Net present value.
• D) Payback period.
• E) Unamortized carrying value.

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Definitions:

FIFO Inventory

A rephrased definition: A method to manage and value inventory assuming the first items purchased are the first to leave the warehouse.

Cost of Goods Sold

Direct expenditures associated with producing the items a company offers for sale.

Weighted Average

A calculation that takes into account the differing degrees of importance of the numbers in a data set.

FIFO and LIFO

Inventory valuation methods; FIFO (First In, First Out) assumes that the earliest goods purchased are the first to be sold, while LIFO (Last In, First Out) assumes the reverse.