Which Method of Evaluating Capital Investment Proposals Uses Present Value

question 173

Multiple Choice

Which method of evaluating capital investment proposals uses present value concepts to compute the rate of return from the net cash flows expected from capital investment proposals?

• A) Internal rate of return
• B) Cash payback
• C) Net present value
• D) Average rate of return

---

Definitions:

Manufacturing Overhead

All indirect costs associated with the manufacturing process, including utilities, rent, and salaries for non-direct labor, that are not directly traceable to specific units produced.

Overapplied Manufacturing Overhead

A scenario in which the allocated manufacturing overhead costs exceed the actual overhead costs incurred.

Work in Process Inventory

Items partly finished in manufacturing but not yet ready for sale, representing a stage between raw materials and final products on the balance sheet.

Overapplied Manufacturing Overhead

A situation where the allocated manufacturing overhead costs assigned to products are more than the actual overhead costs incurred.