If All Prices in the Economy Go Up from One

question 183

Multiple Choice

If all prices in the economy go up from one year to the next, the CPI index, using the previous year as the base would

• A) be less than 100.
• B) be greater than 100.
• C) not be influenced since quantities have remained unchanged.
• D) not be determined since enough information is given.

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Definitions:

IRRs

Internal Rate of Return (IRR) is a metric used in financial analysis to estimate the profitability of potential investments, calculated as the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

NPVs

Net Present Values; the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Capital Budgeting

The process of evaluating and selecting long-term investments that are in line with the goal of a company’s wealth maximization.

Average Accounting Return

A measure of an investment's profitability, calculated as the average net income divided by the average investment.