Which of the Following Statements Regarding the Use of Historical

question 32

Multiple Choice

Which of the following statements regarding the use of historical costs and current costs to compute return on investment (ROI) is (are) true? (A) Historical costs are based on the original costs to acquire a long-term asset,while current costs represent the costs to replace the long-term asset.
(B) For a specific multiple-period project,the return on investment (ROI) computed using current costs will generally be less than the ROI computed using historical costs.

• A)only (A)is true
• B)only (B)is true
• C)both (A)and (B)are true
• D)neither (A)and (B)is true

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Definitions:

Amounts

Quantitative measures or sums of items, whether in abstract numbers, quantities of material, or monetary values.

Net Present Value

Net Present Value is a method used in capital budgeting to assess the profitability of an investment, measuring the difference between the present value of cash inflows and outflows.

Cheques

Documents that are written, dated, and bear a signature, instructing a bank to pay a designated amount of money to the holder.

Daily Interest Rate

The rate at which interest accrues on a loan or investment, calculated on a daily basis.