Use of Net Book Value (NBV) in Valuing Investment in Operating

question 149

Multiple Choice

Use of net book value (NBV) in valuing investment in operating plant assets for investment centers, in contrast to using an estimate of current value, will:

• A) Have no appreciable effect on ROI in most situations.
• B) Have no appreciable effect on plant asset book value.
• C) Have no appreciable effect on operating income reported by the investment centers.
• D) Usually understate ROI.
• E) Usually overstate ROI.

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Definitions:

Disconfirming Instances

Evidence or examples that challenge or refute a hypothesis, theory, or belief, demonstrating its inaccuracy or incompleteness.

Inductive Generalization

A form of reasoning that draws a general conclusion from a limited set of specific observations or cases.

Exceptions

cases or instances that do not follow a general rule, pattern, or expectation.

Counter-Analogy

A contrasting comparison used to refute or argue against a previous analogy by highlighting dissimilar aspects.