Videos
Payback period, Accounting
All the above are the methods of capital budgeting which are having separate principles of deciding on which investment shall be taken up:
Payback period: This method is based on principle that the projects which recover which initial
Accounting rate of return: This method computes the simple rate of return on the average investment involved in the projects and the projects which provides the highest return shall be accepted.
Net Present value: This method is based on principle of time value of money and takes decision on the basis of net residual
Internal return of return: This method also suggest the rate of
Profitability Index: Profitability index is also a proportion of present value of cash inflows and initial investment. The project with higher ratio shall be accepted over the other projects.
Requirement1-a:
The payback period of the project shall be determined.
Requirement 1-b:
The Accounting rate of return of the project shall be computed.
Requirement1-c:
The net present value of projects at 14% discount rate shall be computed.
Requirement1-d:
The Internal rate of return of the projects shall be computed.
Requirement2:
The decision on the project acceptance or rejection to be taken.
Want to see the full answer?
Check out a sample textbook solution
Chapter 26 Solutions
Horngren's Accounting
- Natalie Systems had assets of $310,000 and liabilities of $165,000 at the beginning of the year. During the year, revenues were $158,000 and expenses were $102,000. Also, during the year the business paid the owners a dividend of $6,000, and assets increased by $18,000. What were Natalie's total liabilities at the end of the year?arrow_forwardQuartz Manufacturing completes job #715, which has a standard of 480 labor hours at a standard rate of $19.50 per hour. The job was completed in 510 hours and the actual average labor rate was $20.10 per hour. What is the labor rate variance? (A negative number indicates a favorable variance and a positive number indicates an unfavorable variance.)arrow_forwardI need help solving this general accounting question with the proper methodology.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:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education