Asked by Natalie Vande Linde on Jun 18, 2024
Verified
The interest rate yielded by a project is a rate that will cause the present value of the proposed capital expenditure to equal the present value of the expected annual cash inflows.
Present Value
The value now of a given amount to be paid or received in the future, assuming compound interest.
Interest Rate
The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.
- Familiarize yourself with the approaches and importance of capital budgeting in the context of investment decision-making.
Verified Answer
GL
Gabriella LopezJun 22, 2024
Final Answer :
True
Explanation :
The interest rate described is known as the internal rate of return (IRR), which is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. This means the present value of the expected cash inflows is equal to the initial investment.
Learning Objectives
- Familiarize yourself with the approaches and importance of capital budgeting in the context of investment decision-making.
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