For Which Capital Investment Evaluation Technique Is the Following a Complete

question 393

Multiple Choice

For which capital investment evaluation technique is the following a complete list of its disadvantages when compared to NPV analysis? (1) Ignores cash flows beyond the cutoff date; (2)
Requires an arbitrary cutoff point; (3) Biased against long-term projects; (4) May reject positive NPV
Projects.

• A) NPV
• B) IRR
• C) AAR
• D) Payback period
• E) Discounted payback

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Definitions:

Net Income

The total profit of a company after all expenses and taxes have been deducted from revenue. It is often referred to as the bottom line.

Error

A discrepancy or mistake found in a document, calculation, or process.

Ending Inventory

The value of goods available for sale at the end of an accounting period, not yet sold.

GAAP

A set of rules and standards designed to improve and standardize accounting practices, making financial statements comparable across companies.