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:

Observability

The degree to which the results or effects of an innovation or product can be seen and understood by others.

Involved Experienced Customer

Refers to consumers who have a high level of engagement and familiarity with a product, service, or brand.

Marketplace

A venue (physical or digital) where buyers and sellers come together to exchange goods, services, or information.

Dynamically Continuous Innovation

Innovation that represents a significant change to an existing product or process but does not entirely disrupt consumer habits and behaviors.