The Major Difference Between the Net Present Value Method and the Annual

question 74

Multiple Choice

The major difference between the Net Present Value method and the Annual Rate of Return method in evaluating a capital project is

• A)the ARR method is easier for accountants to justify than the NPV method.
• B)the NPV method is easier for managers to justify than the ARR method.
• C)the ARR method focuses on overall profitability of a project.
• D)the NPV method focuses on the overall profitability of a project.

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Definitions:

Widgets

Widgets are a generic term for small devices or gadgets, or can refer to hypothetical products used in economics or financial examples.

Nonfinancial Performance Measure

A performance measure expressed in units rather than dollars.

Normal Standard

A benchmark or baseline condition expected to be present in a set of data, processes, or operations.

Direct Materials Price Variance

The difference between the actual cost of direct materials and the expected cost at standard prices.