The return on investment formula:ROI=(Gain from Investment - Cost of Investment)/Cost of Investment.
Net Present Value. This is the value of an investment in today's dollars. The theory behind this is that a dollar today is worth more than a dollar tomorrow because of the interest that can be earned.
"Net investment" deducts depreciation from gross investment. Net fixed investment is the value of the net increase in the capital stock per year.
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what is mutually exclusivelly investment
the"Accelerator theory of Investment"
the "Multiplier Accelerator Theory"
The interaction of multiplier and accelerator which bring change in gross national income. The components of theory are warranted growth rate, consumption function, autonomous investment, induced investment and multiplier accelerator relationship. The economy is growing at warranted growth rate when saving and investment are equal. The economic fluctuations around the warranted growth rate are due to working of multiplier and accelerator. The consumption is considered the function of income of the previous period. When consumption lags behind income, the multiplier is treated as lagged relation. Autonomous investment is free from changes in output level so it is not concerned with growth of economy. Induced investment has a link with changes in output so it is related with economic growth rate. The accelerator is based on induced investment. When investment level falls, the accelerator-multiplier works on the reverse direction. The price of contraction is slow as compared to expansion due to asymmetrical working accelerator. During expansion phase the limit to the expansion of real investment is set by production system capacity. In case of downturn the limit to disinvestment is set by depreciation. The businessman does not replace the worn-out machines. During slump multiplier work in reverse order and accelerator has limited role. Autonomous investment declines during slump but remains positive. The cyclical process is repeated in this way.
The Theory of Investment Value was created in 1938.
Describe the Investment and Confluence theory of creativity?
the multiplier principle implies that investment increases output whereas the acceleration principle implies that increases in output will themselves induce increases in investment.
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In a nutshell, the key determinants that affect investment are:The Keynesian Marginal Efficiency of Capital Theory, I=f(r)The Keynesian explanation if there is non ceteris paribus, I=f(all other factors)The Accelerator TheoryThe role of firms' profitsAnd then a collection of the other factors, being exchange rates et cetera.
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limitation of keynesian theory??
In economics, a flexible accelerator refers to a model where investment levels adjust in response to changes in output or demand, allowing firms to quickly adapt to economic conditions. In contrast, a rigid accelerator implies a slower adjustment process, where investment decisions are based on fixed relationships or past levels of capital, leading to less responsiveness to current market conditions. This distinction affects how quickly economies can respond to shocks and how capital is allocated over time.
Investment theory is a framework that seeks to understand the principles and factors that influence how individuals and institutions make decisions about allocating financial resources in order to achieve certain financial goals. It includes concepts like risk and return, diversification, and asset allocation. Investment theory forms the basis for modern portfolio management practices and guides investors in making informed decisions about how to optimize their investment portfolios.