All Else Being Equal, a Company Would Choose to Invest

question 119

Multiple Choice

All else being equal, a company would choose to invest in a capital asset if which of the following is TRUE?

• A) If the payback period equals the amount invested
• B) If the expected accounting rate of return is less than the required rate of return
• C) If the average amount invested is equal to the net cash inflows
• D) If the expected accounting rate of return is greater than the required rate of return

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Definitions:

Allocation Base

A criterion or measure, such as direct labor hours or machine hours, used for allocating costs among multiple cost objects.

Allocation Base

A criterion or standard used to allocate costs among different cost objects, like departments or products.

Overhead Rate

is a calculation that determines how much of overhead cost should be allocated to each unit of production or service, commonly based on direct labor hours, machine hours, or other activity drivers.

Machine Hours

A measure of production time, calculated as the total hours that a machine is operated during a specific period.