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Supplementary objective test questions

10.11 Match the following measures used in investment appraisal to their
corresponding definitions:

Profitability index

Discounted Payback Profitability Index

Equivalent annual cost

Internal rate of return

Accounting rate of return

Discounted payback period

Modified internal rate of return

Options for definitions include:

The cost of owning,
operating and maintaining
an asset over its entire life NPV earned per $1 invested
expressed as an annuity

The rate of return at which The return generated from profits earned
the project has a NPV of by the capital invested
zero

The time required for the
present values of the cash The economic yield of the investment
assuming any cash surpluses are
inflows from a project to
equal the present values of reinvested at the firm’s current cost of
capital
the cash outflows

The number of times a project recovers the initial funds invested

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