Indicate Whether Each of the Following Statements Is True or False

question 62

Short Answer

Indicate whether each of the following statements is true or false.
1. An ordinary annuity assumes that cash flows occur at the beginning of each period.
2. To say that an investment earns the desired rate of return assumes that all cash flows generated by the investment are reinvested at the desired rate of return.
3. Managers should not use two different methods in evaluating capital investment decisions because different methods generally give different results.
4. Copley Corporation uses a required rate of return of 10% for its capital investment decisions. A particular project had a negative net present value. For this project, the actual rate of return was expected to be more than 10%.
5. The net present value of a capital investment project is calculated by subtracting the present value of expected cash inflows from the cost of the investment.

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Definitions:

Operating Departments

Departments within an organization directly involved in its primary revenue-generating activities.

Expense Allocation

The process of assigning indirect costs to different departments, products, or other segments of a business.

Market Values

Market Values refer to the current price or value of assets, goods, or services determined through supply and demand forces in the marketplace.

Raw Material

The fundamental materials that are processed or transformed into finished goods or products in manufacturing.