Which of the following is a method of analyzing capital investment that ignores present value?

Chapter 26 Quiz A_SC

The process by which management plans, evaluates, and controls investments in fixed assets is called capital investment analysis.

Care must be taken when making capital investment decisions, since a long-term commitment of funds is involved and operations could be affected for many years.

Methods that ignore present value in capital investment analysis include the cash payback method.

Methods that ignore present value in capital investment analysis include the average rate of return method.

The cash payback method of capital investment analysis is one of the methods referred to as a present value method

The process by which management plans, evaluates, and controls investments in fixed assets is called _____ analysis.
a. absorption cost
b. cost-volume-profit
c. capital investment
d. variable cost

Which of the following are two methods of analyzing capital investment proposals that both ignore present value?
a. average rate of return and cash payback
b. internal rate of return and net present value
c. internal rate of return and average rate of ret

a. average rate of return and cash payback

Which of the following is a method of analyzing capital investment proposals that ignores present value?
a. internal rate of return
b. discounted cash flow
c. net present value
d. average rate of return

d. average rate of return

Which of the following are present value methods of analyzing capital investment proposals?
a. internal rate of return and average rate of return
b. average rate of return and net present value
c. net present value and internal rate of return
d. net prese

c. net present value and internal rate of return

Which of the following methods of evaluating capital investment proposals uses the concept of present value to compute a rate of return?
a. average rate of return
b. cash payback period
c. accounting rate of return
d. internal rate of return

d. internal rate of return

Chapter 26--Capital Investment Analysis

Student: ___________________________________________________________________________

1. The process by which management plans, evaluates, and controls long-term investment decisions involving

fixed assets is called capital investment analysis.

True False

2. The process by which management plans, evaluates, and controls long-term investment decisions involving

fixed assets is called cost-volume-profit analysis.

True False

3. Care must be taken involving capital investment decisions, since normally a long-term commitment of funds

is involved and operations could be affected for many years.

True False

4. Only managers are encouraged to submit capital investment proposals because they know the processes and

are able to match investments with long-term goals.

True False

5. The methods of evaluating capital investment proposals can be grouped into two general categories that can

be referred to as (1) methods that ignore present value and (2) present values methods.

True False

6. The methods of evaluating capital investment proposals can be grouped into two general categories that can

be referred to as (1) average rate of return and (2) cash payback methods.

True False

7. Average rate of return equals average investment divided by estimated average annual income.

True False