Statement 1: Three of the four capital budgeting screening methods (Net Present Value, Internal Rate of Return and Payback Method) rely on the relevant expected cash inflows and outflows, whereas one (the Accrual Accounting Rate of Return Method) utilizes relevant accounting incomes and expenses. Statement 2: All expected cash flows in a capital budgeting analysis are treated as though they are received at the end of the year to which they are assigned, even though in actuality, they will be received throughout the year. Select the correct response: Both statements are correct. O Only statement 1 is correct

Statement 1: Three of the four capital budgeting screening methods (Net Present Value, Internal Rate of Return and Payback Method) rely on the relevant expected cash inflows and outflows, whereas one (the Accrual Accounting Rate of Return Method) utilizes relevant accounting incomes and expenses. Statement 2: All expected cash flows in a capital budgeting analysis are treated as though they are received at the end of the year to which they are assigned, even though in actuality, they will be received throughout the year. Select the correct response: Both statements are correct. O Only statement 1 is correct

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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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Statement 1: Three of the four capital budgeting screening methods (Net Present Value, Internal Rate of Return and Payback Method) rely on the relevant expected
cash inflows and outflows, whereas one (the Accrual Accounting Rate of Return Method) utilizes relevant accounting incomes and expenses.
Statement 2: All expected cash flows in a capital budgeting analysis are treated as though they are received at the end of the year to which they are assigned, even
though in actuality, they will be received throughout the year.
Select the correct response:
Both statements are correct.
Only statement 1 is correct.
Only statement 2 is correct.
Both statements are incorrect.

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