The Use of Return on Investment (ROI) as a Performance

question 85

True/False

The use of return on investment (ROI) as a performance measure may lead managers to reject a project that would be favorable for the company as a whole.

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Definitions:

Discount Rate

An interest rate used to discount future cash flows to their present value, often applied in capital budgeting and investment valuation.

Working Capital

A financial metric representing the difference between a company's current assets and current liabilities, indicating its short-term liquidity.

Salvage Value

The calculated leftover value of an asset at the expiry of its service life.

Straight-Line Method

A depreciation method that allocates an equal amount of depreciation expense for an asset over its useful life.