A Company Used the Net-Present-Value Method to Analyze an Investment

question 27

Multiple Choice

A company used the net-present-value method to analyze an investment and found the investment to be very attractive. If the firm used straight-line depreciation and changes to the Modified Accelerated Cost Recovery System (MACRS) , the investment's net present value will:

• A) increase.
• B) remain the same.
• C) decrease.
• D) change, but the direction cannot be determined based on the data presented.
• E) fluctuate in an erratic manner.

Discern between different accounting methodologies (accrual vs. cash basis) and their acceptance under GAAP.

Clarify the role and types of contra asset accounts.

Understand the necessity of periodic financial statements and the adjustments required for their preparation.

Grasp the concept of prepayments and their treatment in financial reporting.

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Definitions:

Consistency

Consistency refers to the quality of always behaving or performing in a similar way, maintaining a uniform approach in actions, principles, expectations, or outputs.

Distinctiveness

The characteristic of being easily distinguishable from others due to unique qualities.

Dispositional Attribution

The process of attributing behavior to internal factors or personality traits.

Consensus Behaviour

Actions taken collectively by a group based on widespread agreement or harmony of opinion within the group.