Match each definition with its capital budgeting method. METHODS 1. Accounting rate of return 2. Internal rate

Question:

Match each definition with its capital budgeting method.

METHODS

1. Accounting rate of return

2. Internal rate of return

3. Net present value

4. Payback

DEFINITIONS

a. Is only concerned with the time it takes to get cash outflows returned.

b. Considers operating income but not the time value of money in its analyses.

c. Compares the present value of cash outflows to the present value of cash inflows to determine investment worthiness.

d. The true rate of return an investment earns.

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment... Capital Budgeting
Capital budgeting is a practice or method of analyzing investment decisions in capital expenditure, which is incurred at a point of time but benefits are yielded in future usually after one year or more, and incurred to obtain or improve the...