A major problem with the discounted payback period is that Blank______. Multiple choice question. the cash flows beyond the cutoff date are ignored cost of implementation is ignored opportunity costs are ignored the time value of money is ignored

A major problem with the discounted payback period is that Blank______. Multiple choice question. the cash flows beyond the cutoff date are ignored cost of implementation is ignored opportunity costs are ignored the time value of money is ignored

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 20E

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Question

A major problem with the discounted payback period is that Blank______.

Multiple choice question.

the cash flows beyond the cutoff date are ignored

cost of implementation is ignored

opportunity costs are ignored

the time value of money is ignored

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Which of the following is NOT a limitation of the payback rule? O It does not consider cash flows occurring after the payback period. O Lacks a decision criterion that is economically based. O It does not consider the time value of money. O It is difficult to calculate.
One of the shortcoming of the payback method is that it ignores cash flows after the payback period. True False
Technical problems associated with the internal rate of return include: a. the possibility of multiple IRRs, which rarely present practical difficulties b. the assumption that all cash flows are reinvested at the IRR c. neither of the above d. both of the above
Internal rate of return (IRR) and net presetn value (NPV): -Generally arrive at the same accept/reject decisions-are less sophisticated than payback period-cannot make use of the same cash flows-can be subsitured for by the payback period
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
All of the following are weaknesses of the payback period EXCEPT Select one: a. only an implicit consideration of the timing of cash flows. b. the difficulty of specifying the appropriate payback period. c. a disregard for cash flows after the payback period. d. that it uses cash flows, not accounting projects.
The NPV method determines how much the present value of cash inflows exceeds the present value of costs. True False
Identify the true statements about the payback period method. More than one answer may be correct. Multiple select question. It is biased toward liquidity. It adjusts for the time value of money. It adjusts any risks associated with projects. It adjusts for uncertainty of later cash flows.
In the discounted cashflow method, the discount rate is used for the following reasons EXCEPTa. it removes the timing differences of cashflows.b. it serves as the required rate of return of the asset being valued.c. it removes the expected riskiness of differing assetsd. it equalizes cash inflows to cash outflows so that the value would equal to the market value.
The discounted payback method considers the time value of money as well as the cash flows after the payback.Group of answer choices A.false B. true
Which of the following is an advantage of the average accounting return (AAR)? Multiple choice question. It is based on cash flows and market value. It accounts for the time value of money. Its input data are easily available. It uses an arbitrary benchmark cutoff rate.