ACC212

ACC212 Ch 11 quiz
1.
In comparing two investment alternatives, the difference between the net present values of the two alternatives obtained using the total cost approach will be the same as the net present value obtained using the incremental cost approach. True False

2.
If two projects require the same amount of investment, then the preference ranking computed using either the project profitability index or the net present value will be the same. True False

3.
In preference decisions, the profitability index and internal rate of return methods may produce conflicting rankings of projects. True False

4.
The project profitability index is used to compare the internal rates of return of two companies with different investment amounts. True False

5.
Preference decisions attempt to determine which of many alternative investment projects would be the best for the company to accept. True False

6.
Projects with shorter payback periods are always more profitable than projects with longer payback periods. True False

7.
One criticism of the payback method is that it ignores cash flows that occur after the payback point has been reached. True False

8.
A very useful guide for making investment decisions is: The shorter the payback period, the more profitable the project. True False

9.
If new equipment is replacing old equipment, any salvage received from sale of the old equipment should not be considered in computing the payback period of the new equipment. True False

10.
The simple rate of return focuses on accounting net operating income rather than on cash flows. True False

11.
The simple rate of return method places its focus on cash flows instead of on accounting net operating income. True False

2.
The capital budgeting method that recognizes the time value of money by discounting cash flows over the life of the project,