Which Method of Evaluating Capital Investment Proposals Uses Present Value

question 173

Multiple Choice

Which method of evaluating capital investment proposals uses present value concepts to compute the rate of return from the net cash flows expected from capital investment proposals?

• A) Internal rate of return
• B) Cash payback
• C) Net present value
• D) Average rate of return

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Definitions:

Optimal Dividend Policy

The best strategy a company can adopt for the payment of dividends, balancing between retaining earnings for growth and satisfying shareholders.

Residual

The amount remaining after the greater part has been deduced; in finance, often refers to the residual value or remaining interest in an asset.

Stock Splits

occur when a company divides its existing stock into multiple shares to boost the liquidity of the shares, though the overall value of the company doesn't change.

Economic Benefit

The advantage or gain derived from an economic action or activity such as investments, consumption of goods, and services.