Which of the Following Decision Rules Is Best for Evaluating

question 330

Multiple Choice

Which of the following decision rules is best for evaluating projects for which cash flows beyond a specified point in time, and the time value of money, can both be ignored?

• A) Payback.
• B) Net present value.
• C) Average accounting return.
• D) Profitability index.
• E) Internal rate of return.

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Definitions:

Growing Annuity

A series of periodic payments that grow at a constant rate for a defined number of periods.

Cash Flow Growth Rate

The rate at which a company's cash inflow (from operations, investing, and financing) is growing over a specified period of time.

Rate of Return

The profit or loss garnered on an investment for a certain period, narrated as a percentage of the starting financial input.

University

An institution of higher education and research, which grants academic degrees in various subjects.