The ________ is a capital budgeting method that ignores the time value of money and focuses on the time it takes to recover the company’s cash investment.
ANSWER
INCORRECT
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internal rate of return (IRR)
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THE CORRECT ANSWER
payback period
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YOU WERE SURE AND INCORRECT
accounting rate of return (ARR)
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net present value (NPV)
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I DON'T KNOW YET
The payback period is a capital budgeting method that ignores the time value of money and focuses on the time it takes to recover the company’s cash investment.
The accounting rate of return (ARR) is a capital budgeting method that ignores the time value of money.
The net present value (NPV) is the difference between the present value of the investment’s net cash inflows and the investment’s cost.
The internal rate of return (IRR) incorporates the time value of money. Recall the internal rate of return (IRR) is the rate of return, based on discounted cash flows, that a company can expect to earn by investing in a capital asset.
A manager using the net present value (NPV) for evaluation of a project may assume the cash inflows from the project are immediately reinvested at the ________.
ANSWER
INCORRECT
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market rate of return
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THE CORRECT ANSWER
required rate of return
·
YOU WERE SURE AND INCORRECT
accounting rate of return
·
internal rate of return
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I DON'T KNOW YET
A manager using the net present value (NPV) to evaluate a project may assume the cash inflows from the project are immediately reinvested at the required rate of return.
The internal rate of return (IRR) is the rate of return, based on discounted cash flows, that a company can expect to earn by investing in a capital asset.
The accounting rate of return (ARR) is a measure of profitability computed by dividing the average annual operating income from an asset by the initial investment in the asset.
The market rate of return is the general return on interest and level of risk a consumer or business may be willing to take on an investment.
Which of the following capital budgeting methods highlights risks of investments with longer cash recovery periods?
ANSWER
INCORRECT
·
Accounting rate of return (ARR)
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THE CORRECT ANSWER
Payback period
·
YOU WERE SURE AND INCORRECT
Internal rate of return (IRR)
·
Net present value (NPV)
·
I DON'T KNOW YET
Payback period is the capital budgeting method that highlights risks of investments with longer cash recovery periods.
Net present value (NPV) indicates whether the asset will earn the company’s minimum required rate of return.
Internal rate of return (IRR) incorporates the time value of money and the asset’s net cash flows over its entire life.
Accounting rate of return (ARR) measures the average profitability of the asset over its entire life.
In which step of the capital budgeting process do most companies perform post-audits to compare actual net cash inflows of investments with the net cash inflows of an original estimate?
ANSWER
INCORRECT
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Step 3
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Step 1
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YOU WERE SURE AND INCORRECT
Step 4
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THE CORRECT ANSWER
Step 5
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I DON'T KNOW YET
In Step 5 of the capital budgeting process, most companies perform post-audits to compare actual net cash inflows of investments with the net cash inflows of their original estimates.
A manager must choose among alternative investments due to limited funds in Step 4: Analyze potential investments.
A manger eliminates unwanted investments in Step 3: Analyze potential investments.
A manager identifies potential investments in Step 1: Identify potential capital investment.
Sustainable capital investments should result in ________.
ANSWER
INCORRECT
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government agencies offering fewer grants and tax breaks to organizations who invest in green technology
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THE CORRECT ANSWER
a decrease of lawsuits, regulatory fines, and cleanup costs
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YOU WERE SURE AND INCORRECT
fewer rooftop solar systems mandated in all new construction projects
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a decline of government-sponsored incentives providing organizations reductions in the initial cost of the investment or periodic cost savings
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I DON'T KNOW YET
Sustainable capital investments should result in a decrease of lawsuits, regulatory fines, and cleanup costs. The other answers are not true statements.
More rooftop solar systems are mandated in all new construction projects, such as in San Francisco.
Government-sponsored incentives provide organizations reductions in the initial cost of the investment or periodic cost savings.
Government agencies should offer more grants and tax breaks to organizations who invest in green technology.
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