Which of the Following Statements Regarding Capital Investment Analysis Is

question 12

Multiple Choice

Which of the following statements regarding capital investment analysis is false?

• A) A long-term planning horizon is assumed.
• B) Benefits of potential investment projects are conceptually expressed in terms of accounting income (or reduction in costs) rather than after-tax cash flows.
• C) Project acceptance decisions are based partially on the extent to which these projects and expenditures support the strategy of the organization.
• D) Need to incorporate income-tax effects in the analysis, for both revenues (and gains) as well as expenses (and losses).
• E) Discounted cash flow (DCF) decision models are used by most large organizations.

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Definitions:

Straight-Line Method

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

Discount Rate

The interest rate used to discount future cash flows to present value, often in investment and finance calculations.

Net Present Value

A calculation that compares the present value of cash inflows to the present value of cash outflows over a period of time to evaluate an investment.

Depreciable Equipment

Tangible assets used in business operations whose cost is allocated over its useful life due to wear and tear, obsolescence, or decay.