The Payback and Accounting Rate of Return Models Are Conceptually

question 30

True/False

The payback and accounting rate of return models are conceptually better than the discounted cash flow models because they are based on cash flows, and they consider both profitability and the time value of money.

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Definitions:

Variable Cost

Expenses that change in proportion with the level of production or sales volume, such as raw materials and direct labor costs.

Total Cost

The sum of all expenses incurred in producing a good or service, including both fixed and variable costs.

Fixed Cost

A cost that does not change with an increase or decrease in the amount of goods or services produced or sold.

Opportunity Cost

The significance of the most valuable opportunity sacrificed because of a decision made.