The Accountant of Ronier, Inc

question 2

Multiple Choice

The accountant of Ronier, Inc., has prepared an analysis of a proposed capital project using discounted cash flow techniques. One manager has questioned the accuracy of the results because the discount factors employed in the analysis have assumed the cash inflows occurred at the end of the year when the cash inflows actually occurred uniformly throughout each year. The net present value calculated by the accountant:

• A) will be in error and therefore not usable.
• B) will be slightly overstated but usable.
• C) will be slightly understated but usable.
• D) will produce an error the direction of which is undeterminable.

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Definitions:

Cost-plus Pricing

A pricing strategy where the selling price is determined by adding a specific markup to a product's cost.

Price Elasticity

An economic concept that measures the responsiveness of the quantity demanded of a good or service to a change in its price, influencing pricing strategies and market analysis.

Unbundling

Separating out the individual goods, services, or ideas that make up a product and pricing each one individually.

Break-even Analysis

A calculation to determine the point at which revenue received equals the costs associated with receiving the revenue, marking the no-profit, no-loss situation.