Fill in each statement with the appropriate capital budgeting method: payback period, ARR, NPV, or IRR. a.

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Fill in each statement with the appropriate capital budgeting method: payback period, ARR, NPV, or IRR.
a. _____ and _____ incorporate the time value of money.
b. _____ focuses on time, not profitability.
c. _____ uses accrual accounting income.
d. _____ finds the discount rate that brings the investment’s NPV to zero.
e. In capital rationing decisions, the profitability index must be computed to compare investments requiring different initial investments when the _____ method is used.
f. _____ ignores salvage value.
g. _____ uses discounted cash flows to determine the asset’s unique rate of return.
h. _____ highlights risky investments.
i. _____ measures profitability but ignores the time value of money.
Discounted Cash Flows
What is Discounted Cash Flows? Discounted Cash Flows is a valuation technique used by investors and financial experts for the purpose of interpreting the performance of an underlying assets or investment. It uses a discount rate that is most...
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
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...
Capital Rationing
Capital rationing is the act of placing restrictions on the amount of new investments or projects undertaken by a company. Capital rationing is the decision process used to select capital projects when there is a limited amount of funding available....
Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...
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Managerial Accounting

ISBN: 978-0176223311

1st Canadian Edition

Authors: Karen Wilken Braun, Wendy Tietz, Walter Harrison, Rhonda Pyp

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