The Method of Project Selection That Brings the Time Value

question 59

Multiple Choice

The method of project selection that brings the time value of money into capital investment analysis is the

• A) rate of return on initial investment.
• B) net present value method.
• C) payback method.
• D) accounting rate-of-return method.

---

Definitions:

Financial Assets

Instruments that signify a financial claim or equity interest in an entity, including stocks, bonds, bank deposits, and mutual funds.

Nominal Interest Rate

The rate of interest before adjustments for inflation, indicating the face value of interest payments.

Real GDP

A country's economic production measure that accounts for fluctuations in prices due to inflation or deflation, indicating the true volume of goods and services created.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision or selection among multiple options.