With Respect to the Capital Budgeting Practices of Large U

question 93

Multiple Choice

With respect to the capital budgeting practices of large U. S. corporations

• A) the profitability index has been gaining in popularity.
• B) IRR and NPV have been gaining in popularity.
• C) payback and discounted payback have been gaining in popularity.
• D) IRR and NPV have declined in popularity.

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Definitions:

Impairment Loss

A reduction in the recoverable value of a fixed asset or goodwill below its book value, leading to a write-down and charge against earnings.

Cost Method

An accounting method where investments are recorded at their acquisition cost without subsequent change except for impairment.

Fair Value

The price that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Goodwill Impairment

A charge that companies record when the book value of goodwill on their balance sheets exceeds its fair market value, indicating that the asset has lost value.