alleryStart learning →Of the four named methods, how many account for the time value of money?
AThree of them
BAll four of them
CTwo of them
DOne of them
Answer & Solution
Correct answer: C. Two of them
1. Split the four named methods into their two families.
2. The four methods are payback, accounting rate of return, NPV and IRR.
3. Two non-time value evaluative methods are the payback method and the accounting rate of return.
4. Two commonly used time value of money-based options are NPV and IRR.
5. So two of the four account for the time value of money.
_Source: OpenStax Principles of Accounting, Volume 2: Managerial Accounting (CC BY-NC-SA 4.0), Ch 11 'Capital Budgeting Decisions'_
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