The difference between gross investment and net investment is: equal to capital consumption allowances : In the United States, annual per-capita GDP in 2009 was around : \$46,500: As defined in our text, private domestic investment (I) does NOT include: investment in labor productivity through education and training A project requires an initial investment of \$225,000 and is expected to generate the following net cash inflows: Year 1: \$95,000. The following equation illustrates that GDP is calculated by summing consumption (C), investment (I), government spending on goods and services (G), and net exports (NX): GDP = C + I + G + NX Because total expenditure on goods and services produced within a country must equal a nation's total income, the equation can also be written as follows, where Y is income: Y = C + I + G + NX 5.2. Year 4: \$55,000. A. E) Discounted payback period. Suppose a country is experiencing balanced trade: Saving (greater/less/equal to) Investment C+I+G (greater/less/equal to) Y Net Capital Outflow (greater/less/equal to) 0 0 (greater/less/equal to) Net exports Imports (greater/less/equal to) Exports C= consumption I = investment G = government Y = GDP Appreciate the help guys. Lease Classifications for a Lessee. C) Average accounting return. In other words, it is the expected compound annual rate of return that will be earned on a project or investment.) An investment should be accepted if, and only if, the NPV is exactly equal to zero. A lease is an arrangement under which a lessor agrees to allow a lessee to control the use of identified property, plant, and equipment for a stated period of time in exchange for one or more payments. is the discount rate at which the net present value of an investment is equal to zero. So having high amounts of savings is good for economic growth. Page 23 At this level of income autonomous planned investment is 100, thereby bringing total planned expenditure (consumption + investment) equal to the level of output (or income). 1. Thanks. Which one of the following statements concerning net present value (NPV) is correct? Year 3: \$60,000. B) Internal rate of return. Put another way, it is the compound annual return an investor expects to earn (or actually earned) over the life of an investment. Required: Compute net present value of the project if the minimum desired rate of return is 12%. The discount rate that makes the net present value of an investment exactly equal to zero is the: A) Payback period. In a small open economy, if exports equal \$20 billion, imports equal \$30 billion, and domestic national saving equals \$25 billion, then net capital outflow equals: –\$25 billion. This preview shows page 10 - 13 out of 38 pages.. 31) _____ A) B) C) D) E) Net investment is equal to gross investment minus depreciation. There are several types of lease designations, which differ if an entity is the lessee or the lessor. Year 2: \$80,000. 51. a) the growth rate of the quantity of money b) a firm’s optimal capital stock divided by its actual capital stock c) the ratio of a firm’s stock market valuation to the value of its physical assets d) the ratio: gross investment/net investment Remember that investment leads to the accumulation of capital which leads to increased labor productivity which leads to economic growth (which is a good thing). D) Profitability index. Which of the following is a definition of Tobin’s q? With planned saving and investment being equal, the economy is in a state of equilibrium — there are no forces at work changing the level of output or income. This shows that the total amount of savings occurring in the economy is equal to the amount being invested. –\$10 billion. Solution: The cash inflow generated by the project is uneven. The term “net investment income” shall not include any distribution from a plan or arrangement described in section 401(a), 403(a), 403(b), 408, 408A, or 457(b).