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28 Sep 2019
1) Why is it beneficial to routinely compare the cost ofindividual investments to future earnings and cash flows?
To rank investments To keep your boss happy To practice my accounting skills 2) What is a synonym for capital investment analysis? Choosethe best answer:
Capital budgeting Balance Sheet Income Statement 3) What are two methods to evaluate capital investments thatdo not use present values?
Average rate of return method Cash payback method Double declining balance depreciation 4) What are two methods to evaluate investments that usepresent value?
Statement of cash flows Net present value method Internal rate of return method 5) The time value of money concept recognizes that:
A dollar today is worth more than a dollar tomorrow becausetoday's dollar can earn interest. The Federal Reserve Board raised the interest rate. Straight line depreciation is better than the double decliningbalance method. 6) The internal rate of return method of analysis is used toevaluate proposed capital investments. It uses present valueconcepts to compute the rate of return from the net cash flowsexpected from the investment. Are there any disadvantage of the IRRmethod?
7) Assume the average rate of return for investment A and Bamounts to 10% (A) verses 20% (B). Which investment is preferable,and why?
8) Explain how to compute the net present value of aninvestment, in your own words.
1) Why is it beneficial to routinely compare the cost ofindividual investments to future earnings and cash flows?
To rank investments
To keep your boss happy
To practice my accounting skills
2) What is a synonym for capital investment analysis? Choosethe best answer:
Capital budgeting
Balance Sheet
Income Statement
3) What are two methods to evaluate capital investments thatdo not use present values?
Average rate of return method
Cash payback method
Double declining balance depreciation
4) What are two methods to evaluate investments that usepresent value?
Statement of cash flows
Net present value method
Internal rate of return method
5) The time value of money concept recognizes that:
A dollar today is worth more than a dollar tomorrow becausetoday's dollar can earn interest.
The Federal Reserve Board raised the interest rate.
Straight line depreciation is better than the double decliningbalance method.
6) The internal rate of return method of analysis is used toevaluate proposed capital investments. It uses present valueconcepts to compute the rate of return from the net cash flowsexpected from the investment. Are there any disadvantage of the IRRmethod?
7) Assume the average rate of return for investment A and Bamounts to 10% (A) verses 20% (B). Which investment is preferable,and why?
8) Explain how to compute the net present value of aninvestment, in your own words.
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