Which of the Following Statements Describes the Modified Payback Method

question 28

Short Answer

Which of the following statements describes the modified payback method? a. We compute how long it takes to recoup the initial investment using undiscounted cash flows.
B) The method accumulates the present value of future cash flows over time and compares the cumulative value with the salvage value of the capital expenditure.
C) The method accumulates the absolute value of future cash flows over time and compares the cumulative value with the present value of the capital expenditure.
D) The year in which the accumulated present value of future cash flows exceeds the initial cash outflow determines the modified payback period.
E) None of the above describes the modified payback method.

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Definitions:

Mineral Deposit

A naturally occurring accumulation of minerals that can be extracted for economic benefit.

Journalize

The act of recording transactions in an accounting journal, noting the debit and credit aspects of each transaction.

Straight-Line Method

A depreciation method that allocates an asset's cost evenly across its useful life.

Annual Depreciation

Definition: The portion of the cost of a fixed asset that is expensed on an annual basis through the process of depreciation.