The Payback Method of Capital Budgeting Approach to an Investment

question 59

Multiple Choice

The payback method of capital budgeting approach to an investment decision ________.

• A) considers cash flows over the life of the investment
• B) assumes that cash flows occur uniformly throughout the year
• C) considers time value of money
• D) ignores the initial investment

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Definitions:

Direct Materials

Raw materials that are directly incorporated into a finished product and can be directly attributed to the product manufacturing process.

Factory Building

A type of commercial real estate designed for manufacturing processes, assembly, and storing materials and goods used and produced by industrial and manufacturing operations.

Rent Expense

The cost incurred by a company for using or occupying property or equipment for business operations.

Administrative Facilities

Facilities and resources provided to support the management and day-to-day operations of an organization.