The Interest Rate That Discounts a Series of Future Cash

question 30

Multiple Choice

The interest rate that discounts a series of future cash flows to its present value is called the

• A)internal rate of return.
• B)external rate of return.
• C)creditors rate of return.
• D)prime lending rate published in The Wall Street Journal.
• E)federal funds rate.

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Definitions:

Cash Flow

The aggregate money movement into and out of a company, notably impacting its cash on hand.

Excess Capacity

The availability of more production capacity within a business than is currently needed to meet demand.

Special Order

An order for a product or service that is outside the company's normal scope of work, often requiring a unique set of costs and pricing.

Relevant Cost

Costs that are directly related to a specific business decision, affecting the future cash flows.