Answer the following statements true (T) or false (F)

Question

1. The payback and accounting rate of return methods are often used to perform an initial screening of investments.
2. The payback method provides management with valuable information about the time period in which the cash invested will be recouped.
3. The net present value and internal rate of return methods are appropriate for longer-term investments because they ignore the time value of money.
4. Cash inflows include future cash revenue generated from an investment and any future residual value of the asset but exclude any future savings in ongoing cash operating costs resulting from the investment.
5. Most capital budgeting methods focus on accrual-based income.

Answer 1

1. TRUE
2. TRUE
3. FALSE
4. FALSE
5. FALSE