COST ACCOUNTING
CAPITAL BUDGETING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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fully considers time value of money
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takes into consideration the yield to maturity
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usus profit in the analysis
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none of the above
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Detailed explanation-1: -Advantages of the NPV method The obvious advantage of the net present value method is that it takes into account the basic idea that a future dollar is worth less than a dollar today. In every period, the cash flows are discounted by another period of capital cost.
Detailed explanation-2: -Answer and Explanation: All of the following are advantages of NPV except: C. it recognizes the timing of the benefits resulting from the project. This is not an advantage of NPV due to the fact that NPV results in a single valuation of the project but does not give any feedback as to when the cashflows will come in.
Detailed explanation-3: -Answer and Explanation: The correct answer is A) Accept a project if NPV > cost of investment. The net present value estimates the current worth of a project by taking the present value of the future cash flows minus the cost of investment.
Detailed explanation-4: -the present value of all future net cash flows that result from the project minus the initial investment required to start the project.