Which of the Following Is Not an Acceptable Method of Measuring

question 78

Multiple Choice

Which of the following is not an acceptable method of measuring risk for capital budgeting purposes?

• A) Modified internal rate of return
• B) Sensitivity analysis
• C) Using a risk-adjusted discount rate
• D) Proxy, or pure play method for estimating a project's beta

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Definitions:

Tax Rate Change

An adjustment to the rate at which earnings or transactions are taxed, imposed by governmental taxing authorities.

Deferred Tax Assets

The amounts of income taxes recoverable in future periods in respect of deductible temporary differences, carryforward of unused tax losses, and carryforward of unused tax credits.

Taxable Temporary Difference

The difference between the tax base of an asset or liability and its carrying amount in the financial statements that will result in taxable amounts in future periods.

Deferred Tax Asset

An accounting term that refers to a situation where a company has paid more taxes to the government than it has shown as an expense in its financial statements, leading to future tax savings.