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Presented Below Are Terms Preceded by Letters (A)through (F)and Followed

Question 142

Matching

Presented below are terms preceded by letters (a)through (f)and followed by a list of definitions (1)through (6).Match the letter of the terms with the definitions.Use the space provided preceding each definition.

Premises:

Responses:

Annual after-tax net income divided by annual average investment.

Uneven cash flows

The process of restating future cash flows in terms of their present value.

Break-even time

An estimate of an asset's value to the company; calculated by discounting the future cash flows from the investment at a satisfactory rate and then subtracting the initial cost of the investment.

Accounting rate of return

A rate used to evaluate the acceptability of an investment; equals the after-tax periodic income divided by the average investment in the asset.

Return on average investment

A measure of the amount of time needed for the present value of the net cash flows to equal the initial cost of an investment.

Net present value

Cash flows that are not all equal in amount.

Discounting

Premises:

Annual after-tax net income divided by annual average investment.

The process of restating future cash flows in terms of their present value.

An estimate of an asset's value to the company; calculated by discounting the future cash flows from the investment at a satisfactory rate and then subtracting the initial cost of the investment.

A rate used to evaluate the acceptability of an investment; equals the after-tax periodic income divided by the average investment in the asset.

A measure of the amount of time needed for the present value of the net cash flows to equal the initial cost of an investment.

Cash flows that are not all equal in amount.

Responses:

Uneven cash flows

Break-even time

Accounting rate of return

Return on average investment

Net present value

Discounting

Correct Answer:

Premises:

Responses:

Annual after-tax net income divided by annual average investment.

The process of restating future cash flows in terms of their present value.

An estimate of an asset's value to the company; calculated by discounting the future cash flows from the investment at a satisfactory rate and then subtracting the initial cost of the investment.

A rate used to evaluate the acceptability of an investment; equals the after-tax periodic income divided by the average investment in the asset.

A measure of the amount of time needed for the present value of the net cash flows to equal the initial cost of an investment.

Cash flows that are not all equal in amount.

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