The Rate of Return Used to Calculate the Present Value

question 5

Multiple Choice

The rate of return used to calculate the present value of the estimated future cash flows of a project is called the _____.

• A)discount rate
• B)compound rate
• C)risk-free rate
• D)nominal rate

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Definitions:

Target Cost

The maximum amount that can be spent on a product while still earning the required profit margin, based on market-driven pricing.

Desired Return

The target profit or return on investment that a company or investor aims to achieve.

Investment

Allocation of resources, typically money, in order to generate income or profit over time.

Selling Price

The amount of money a buyer pays to purchase a product or service from a seller.