The correct methods of analyzing capital investments factors in the time value of money among given options.

Question

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Answer 1

Question

Chapter 12, Problem 1QC

To determine

To identify: The correct methods of analyzing capital investments factors in the time value of money among given options.

Expert Solution & Answer

Answer to Problem 1QC

Option c. The internal rate of return method involves time value of money in analyzing capital investment factors.

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 cash inflow to find the value of it. This method does not involve the time value of money. It is based on the value of money as it is. Hence, it is an incorrect option.

b.

Accounting rate of return is calculated on the basis of operating profit earned on the investments. This method does not require time value of money. This is an incorrect option.

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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Students have asked these similar questions

Toodles Inc. had sales of $1,840,000. Cost of goods sold,administrative and selling expenses, and depreciation expenses were $1,180,000, $185,000 and $365,000 respectively. In addition, the company had an interest expense of $280,000 and a tax rate of 35 percent. (Ignore any tax loss carry-back or carry-forward provisions.)Arrange the financial information for Toodles Inc. in an income statement and compute its OCF?

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Answer 2

Question

Chapter 12, Problem 1QC

To determine

To identify: The correct methods of analyzing capital investments factors in the time value of money among given options.

Expert Solution & Answer

Answer to Problem 1QC

Option c. The internal rate of return method involves time value of money in analyzing capital investment factors.

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 cash inflow to find the value of it. This method does not involve the time value of money. It is based on the value of money as it is. Hence, it is an incorrect option.

b.

Accounting rate of return is calculated on the basis of operating profit earned on the investments. This method does not require time value of money. This is an incorrect option.

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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Answer 3

Question

Chapter 12, Problem 1QC

To determine

To identify: The correct methods of analyzing capital investments factors in the time value of money among given options.

Expert Solution & Answer

Answer to Problem 1QC

Option c. The internal rate of return method involves time value of money in analyzing capital investment factors.

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 cash inflow to find the value of it. This method does not involve the time value of money. It is based on the value of money as it is. Hence, it is an incorrect option.

b.

Accounting rate of return is calculated on the basis of operating profit earned on the investments. This method does not require time value of money. This is an incorrect option.

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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Answer 4

Question

Chapter 12, Problem 1QC

To determine

To identify: The correct methods of analyzing capital investments factors in the time value of money among given options.

Expert Solution & Answer

Answer to Problem 1QC

Option c. The internal rate of return method involves time value of money in analyzing capital investment factors.

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 cash inflow to find the value of it. This method does not involve the time value of money. It is based on the value of money as it is. Hence, it is an incorrect option.

b.

Accounting rate of return is calculated on the basis of operating profit earned on the investments. This method does not require time value of money. This is an incorrect option.

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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Answer 5

Chapter 12, Problem 1QC

To determine

To identify: The correct methods of analyzing capital investments factors in the time value of money among given options.

Expert Solution & Answer

Answer to Problem 1QC

Option c. The internal rate of return method involves time value of money in analyzing capital investment factors.

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 cash inflow to find the value of it. This method does not involve the time value of money. It is based on the value of money as it is. Hence, it is an incorrect option.

b.

Accounting rate of return is calculated on the basis of operating profit earned on the investments. This method does not require time value of money. This is an incorrect option.

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.

Answer 6

Chapter 12, Problem 1QC

To determine

To identify: The correct methods of analyzing capital investments factors in the time value of money among given options.

Expert Solution & Answer

Answer to Problem 1QC

Option c. The internal rate of return method involves time value of money in analyzing capital investment factors.

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 cash inflow to find the value of it. This method does not involve the time value of money. It is based on the value of money as it is. Hence, it is an incorrect option.

b.

Accounting rate of return is calculated on the basis of operating profit earned on the investments. This method does not require time value of money. This is an incorrect option.

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.

Answer 7

Chapter 12, Problem 1QC

To determine

To identify: The correct methods of analyzing capital investments factors in the time value of money among given options.

Answer 8

Expert Solution & Answer

Answer to Problem 1QC

Option c. The internal rate of return method involves time value of money in analyzing capital investment factors.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

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 cash inflow to find the value of it. This method does not involve the time value of money. It is based on the value of money as it is. Hence, it is an incorrect option.

b.

Accounting rate of return is calculated on the basis of operating profit earned on the investments. This method does not require time value of money. This is an incorrect option.

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.

Answer 12

Ch. 12 - Prob. 1QC Ch. 12 - (Learning Objective 2) After identifying potential...Ch. 12 - Prob. 3QC Ch. 12 - Prob. 4QC Ch. 12 - Prob. 5QC Ch. 12 - Prob. 6QC Ch. 12 - Prob. 7QC Ch. 12 - Prob. 8QC Ch. 12 - Prob. 9QC Ch. 12 - (Learning Objective 5) Which of the following...

The correct methods of analyzing capital investments factors in the time value of money among given options.

To identify: The correct methods of analyzing capital investments factors in the time value of money among given options.

Answer to Problem 1QC

Explanation of Solution

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Chapter 12 Solutions