Posted: July 10th, 2016

How is invested capital measured?

You can receive $10,000 today or $3,000 per year for the next five years. If the required rate of return is 10%, what option should be selected? (The present value of an ordinary annuity at 10% for five periods is 3.7908. The present value of one at 10% for five periods is 0.6209.)
Answer
A. Receive $3,000 per year for the next five years.
B. Receive $10,000 today
C. The results are the same for both options.
D. Neither option is desirable.In return on investment calculations, we should measure invested capital ________ because ________.
Answer
A. at the beginning of the period; it is a lead indicator
B. as an average for the period under review; income is measured over a period of time
C. at the end of the period; it is easiest
D. at the end of the period; income is measured at the end of the period