In Capital Rationing, Alternative Proposals That Survive Initial and Secondary

question 183

Multiple Choice

In capital rationing, alternative proposals that survive initial and secondary screening are normally evaluated in terms of

• A) present value
• B) nonfinancial factors
• C) maximum cost
• D) net cash flow

---

Definitions:

Net Present Value Method

A method used to evaluate investments by calculating the difference between the present value of cash inflows and outflows over a period of time.

Average Rate

Typically refers to the mean value or norm of a variable rate over a specified period, such as interest rates or exchange rates.

Capital Investment Proposals

Plans or suggestions for allocating resources towards long-term assets in hopes of gaining future returns.

Salvage Value

The approximate remaining value of an asset when it reaches the end of its operational lifespan.