A. it is veryA disadvantage of the average rate of return method of capital investment analysis is thatcomplex to compute B. it does not include the entire amount of income earned over the life of a project C.it does not emphasize accounting income, which is often used by investors and creditors in evaluatingmanagement performance D. it does not directly consider the timing of the expected cash flows

Average rate of return method of capital investment analysis:The average rate of return is the…

Answered: . A. it is very A disadvantage of the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Similar questions

Consider the following statement: "The estimation of the Free Cash Flow to the Firm (FCF) considers investment decisions but ignores financing decisions." Is this statement true or false? Explain your answer.
investments in working capital by a firm:a. Are simply accounting entries and do not afffect NPV b. Do not matter e because cash is recovered at the end of the project c. Reduce a projects cash flow and NPV d. Increase a projects NPV e. Should be ignored in estimating a projects NPV
If a firm must forgo a cash flow, not leasing an owned building for example, in order to accept some investment project, are the lost cash flows included in the analysis?
In understanding capital structure, one approach, which I adopt, is to demonstrate, under certain assumptions, that financing decisions are irrelevant – in that they have no impact on firm value. Then, we show how relaxing these assumptions impacts optimal financing choices. Group of answer choices True False
When measuring the investment of the firm, assets are often used. Select all that are issues with this measurement: Question 2 options: a) The book value of assets declines with use for sales (matching), which makes it appear that the same sales can be made with a smaller investment in assets in the future b) The firm has paid for these assets already (cash flow in the past) c) The market value of assets can vary d) Assets do not represent everything that is needed to make sales
Why is the depreciation tax shield a component of analyzing investment decisions? O A. Depreciation causes a cash outflow that is added to determine net income. O B. Though no cash was paid out, depreciation was included on the tax return, which caused the company to pay taxes on the amount of depreciation. O C. Depreciation lowers cash outflows for income taxes paid. O D. Depreciation creates cash flows that do not appear on the income statement.
Define negative working capital. Is a negative working capital a sign of illiquidity or of liquidity? Use the framework identified by Fazzari and Petersen, 1993
The rationale for funds transfer pricing is that there are: Group of answer choices D. Less chances for controversy in organizations B. Controls that can be exercised over the dynamics of yield curves C. Controllable interest rate risks removed from business results A. Economies of scale in managing interest rate risk
This can occur when a selection among mutually exclusive alternatives is based wrongly on maximization of IRR on the total cash flow. O a. Investment errors O b. Ranking errors Ос. Incremental errors Od. Alternative errors
Which of the following is a drawback of payback period method of investment appraisal? Oit is cash flow based OIt consider the time value of money it does not measure potential impact on shareholder wealth OIt is profit based
A firm’s weighted average cost of capital should not do which one of the following? Group of answer choices measure the cost of short-term sources of funds measure cost on a marginal basis measure the cost of long-term sources of funds measure cost on an after-tax basis
If the accounting rate of return exceeds the required accounting rate of return, O A. invest in the capital asset. B. only invest if the payback period is also less than the required rate of return. O C. do not invest in the capital asset. OD. only invest if the payback period is also greater than the required rate of return.

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