
Memo:
To: The Manager
From: ABC
Subject: To identify the measurement basis and unit that the payback period, accounting
Explanation:
Payback period:
Payback period is a type of capital budgeting technique which describes the number of year or length of time required for proposals cumulative
It is measured in periods and on the basis of
The advantages of the method are as follows:
The disadvantages of payback period are as follows:
Accounting rate of return:
Accounting rate of return is a type of capital budgeting technique which is based on accounting principle of
It is measured in percentage and on the basis of accrual income.
The advantages of the method are as follows:
The disadvantages of payback period are as follows:
Net present value:
Net present value can be referred to as a discounted cash flow technique which is applied to weight the items of trade-off between investment and future returns. It is the sum of the present value of all the cash inflows less the sum off present value of all cash outflow. Hence, it is the sum of all the discounted value of cash flows of the project.
It is measured in dollars and on the basis of cash flows and profitability.
The advantages of net present value are as follows:
The disadvantage of net present value is difficult to compare dissimilar projects.
Internal rate of return:
Internal rate of return (IRR) can be defined as the yield or the rate of return earned by a project. It is that rate of return which a project earns. It is the rate of return at which present value of cash inflows is equal to the present value of cash outflows. In other words, at IRR the net present value equals zero.
The advantages of internal rate of return are as follows:
The disadvantage of internal rate of return is that it ignores varying risk levels over life of the project.

Want to see the full answer?
Check out a sample textbook solution
Chapter 24 Solutions
FINANCIAL & MANAGERIAL ACCOUNTING
- Please provide the accurate answer to this general accounting problem using appropriate methods.arrow_forwardI need help finding the accurate solution to this general accounting problem with valid methods.arrow_forwardin the “Problems – Series A” section 8-19A of Ch. 8, “Performance Evaluation” of Fundamentals of Managerial Accounting Concepts. Scenario: The Redmond Management Association held its annual public relations luncheon in April Year 2. Based on the previous year’s results, the organization allocated $25,290 of its operating budget to cover the cost of the luncheon. To ensure that costs would be appropriately controlled, you, the treasurer, prepared the following budget for the Year 2 luncheon. Usin Excel—showing all work and formulas—to complete the following: I need help Preparing a flexible budget. Computing the sales volume variance and the variable cost volume variances based on a comparison between the master budget and the flexible budget. And Computing flexible budget variances by comparing the flexible budget with the actual results.arrow_forward
- I am searching for the accurate solution to this financial accounting problem with the right approach.arrow_forwardCher Enterprises reported net income of $2,100,000. The average total liabilities were $6,800,000 and the average total stockholders' equity was $7,400,000. Interest expense was $250,000 and the tax rate was 30%. What is the return on assets ratio?arrow_forwardThe manufacturing overhead is_.arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





