To identify: The correct methods of analyzing capital investments factors in the time value of money among given options.
Answer to Problem 1QC
Option c. The
Explanation of Solution
Use of time value of money gives an appropriate idea of future and present money as it includes interest rate factor in determining the value of money. Discounting or compounding of money requires time value of money concept.
- a.
Payback period involves operating
- b.
Accounting
c.
Internal rate of return uses discounted cash inflows and out flows for valuation of money in the projects. So, it does involve time value of money. Hence, this is the correct option.
d.
All of the above methods factor in the time value of money. As correct option is c so, this option is incorrect.
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Chapter 12 Solutions
Managerial Accounting, Student Value Edition (5th Edition)
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Pfin (with Mindtap, 1 Term Printed Access Card) (...FinanceISBN:9780357033609Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning