Why Is It Usually Necessary to Use the Time Value

question 79

Multiple Choice

Why is it usually necessary to use the time value of money when performing a cost-benefit analysis?

• A)In most investment projects costs are incurred up front, but benefits are provided in the future.
• B)Although costs and benefits generally occur concurrently, the benefits will accrue value over time, due to interest.
• C)For practical purposes, a dollar today may be considered to be equal to a dollar at some future time.
• D)For an investment project to be considered, costs must have a higher dollar value from benefits.

---

Definitions:

Responsibility Accounting

An accounting system that collects, summarizes, and reports financial information related to the responsibilities of individual managers.

Cost Centre Manager

An individual responsible for managing, monitoring, and controlling the costs associated with a particular department or segment of a business.

Investment Centre Manager

An individual responsible for overseeing a division or unit of a business that directly controls its investments and related returns.

Revenue Centre Manager

An individual responsible for generating revenue within a particular segment or area of a business, focusing on sales and marketing efforts.