When Using the NPV Method, the Interest Rate Used to Discount

question 41

Multiple Choice

When using the NPV method, the interest rate used to discount cash flows shouldnot be thought of as the:

• A) hurdle rate.
• B) internal rate of return.
• C) minimum required rate of return.
• D) discount rate.

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Definitions:

Expenses

The outflows or other using up of assets or incurring of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities.

Reportable Segments

Segments of a business that must be disclosed separately in the company's financial reports due to their significant revenue, profitability, or other factors according to accounting standards.

Operating Profit

Earnings before interest and taxes (EBIT), calculated by subtracting operating expenses from gross profit.

Segment Revenues

Segment revenues refer to the income generated from a specific division or business unit within a larger corporation.