Could someone please help me answer these accounting questions?
Could someone please help me answer these accounting questions?
Which of the following is not an important financial consideration in capital budgeting?
A.The timing of the investment's future cash flows.
B.The investment's future profitability.
C.The sunk costs related to the investment.
D.The initial cost of the investment and its estimated salvage value.
Of the following techniques of capital budgeting, which one explicitly incorporates an estimate of an interest rate into the basic computation?
A.Payback method.
B.Average rate of return.
C.Net present value method.
D.Accounting book value method.
Answers:
Chosen Answer
Jack C: Good Morning Ang! Your answers are as follows: 1) C. The sunk costs are those that have already been spent. The other three items deal with future values: future cash flows, future profitability, estimated salvage value. 2) C. The net present value method uses an estimated discount interest rate that represents the rate of return that could be earned on an investment in the financial markets with similar risk. Payback uses only cash flows to recoup the investment; average rate of return calculates an interest rate, but does not require an estimate of an interest rate into the basic computation; and the accounting book value method does not use an interest rate. I hope this helps!
2009-12-19 07:04:00
Jack C: Good Morning Ang! Your answers are as follows: 1) C. The sunk costs are those that have already been spent. The other three items deal with future values: future cash flows, future profitability, estimated salvage value. 2) C. The net present value method uses an estimated discount interest rate that represents the rate of return that could be earned on an investment in the financial markets with similar risk. Payback uses only cash flows to recoup the investment; average rate of return calculates an interest rate, but does not require an estimate of an interest rate into the basic computation; and the accounting book value method does not use an interest rate. I hope this helps!
2009-12-19 07:04:00