Within the Context of Capital Budgeting, a Primary Goal-Congruency Problem

question 156

Multiple Choice

Within the context of capital budgeting, a primary goal-congruency problem exists when discounted cash flow (DCF) models are used for decision-making purposes, but accrual-based earnings figures are used for subsequent performance-evaluation purposes. Which of the following items is not likely to be useful for addressing this goal-congruency problem?

• A) Monte Carlo simulation.
• B) Use of EVA® as the financial-performance metric.
• C) Separating incentive compensation (i.e., "reward") from budgeted performance.
• D) Conducting post-audits of capital investment decisions.

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Definitions:

Impartial And Honest

Being fair and truthful, without bias or deceit.

Cognitive Dissonance

The mental discomfort experienced by an individual who holds two or more contradictory beliefs, ideas, or values at the same time.

Binomial Random Variable

A type of discrete random variable that represents the number of successes in a fixed number of binary trials, each having the same probability of success.

Telephone Survey

A research method in which participants are asked questions over the phone to gather data or insights.