The Most Commonly Used Methods in the Evaluation of Capital

question 27

True/False

The most commonly used methods in the evaluation of capital investment proposals are net present value method,payback period method,and the accounting rate-of-return method.

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Definitions:

Nondiversifiable Risk

Also known as systematic risk, it refers to the portion of an investment's risk that cannot be eliminated through diversification, affecting the entire market or economy.

Diversifiable Risk

A type of investment risk that can be reduced through diversification of a portfolio across different assets, sectors, or geographical locations.

Unique Risk

Risk that is specific to an individual asset or company, which can be mitigated through diversification.

Firm-Specific

Refers to risk or information that is unique to a particular company and not related to the market or industry.