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Which of the following best describes a capital budgeting post-audit
a comparison of actual results of capital investments with projected results
Which of the following most accurately describes an annuity?
a stream of equal cash payments made at equal time intervals
Discounted cash flow methods, such as net present value and internal rate of return,
consider discounted cash flows
Capital rationing is a process adopted when a company has limited resources, and it must find ways to reduce operating expenses in all of its divisions and units.
false
Managers generally use payback as the sole method for deciding whether to invest in an asset
false
The payback method considers cash flows that occur both during and after the payback period.
false
Management's minimum desired rate of return on a capital investment is known as the return on investment.
false
Which of the following is the rate of return, based on discounted cash flows, a company can expect to earn by investing in a capital asset?
internal rate of return
Capital budgeting is the ________
process of planning for investments in long-term assets
Which of the following best describes the profitability index?
the ratio of present value of net cash inflows to initial investment
An opportunity cost is the benefit foregone by choosing an alternative course of action
true
Compound interest assumes that all interest earned will remain invested and earn additional interest at the same interest rate
true
The accounting rate of return is calculated by dividing the average annual operating income by the average amount invested.
true
The payback and accounting rate of return (ARR) methods are suitable for investments with a relatively short time span.
true