Question
15. Of the 4 choices below, pick the answer that makes the most sense. If investment A has a payback period of 5 years and
15. Of the 4 choices below, pick the answer that makes the most sense. If investment A has a payback period of 5 years and investment B has a payback period of 3 years, then
a. | A is more profitable than B. |
b. | B is more profitable than A. |
c. | A & B are probably not equally profitable. |
d. | A & B are probably equally profitable. |
16. When a project has uniform cash inflows over its life, a management accountant would use the approach that you used in answering question 8 above.
However, when a project has non-uniform cash inflows over its life, a management accountant (as we did in class) may be forced to use ___________________ to find the project's internal rate of return.
A. | a screening decision in conjunction with the net present value method. |
B. | a trial-and-error approach in conjunction with the net present value method. |
C. | a sensitivity analysis approach in conjunction with the net present value method. |
D. | a preference decision in conjunction with the net present value method. |
17. Which method of evaluating capital projects assumes that cash inflows can be immediately reinvested in new projects at the hurdle rate?
a. | internal rate of return |
b. | payback period |
c. | net present value |
d. | accounting rate of return |
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