Stack the capital budgeting terms

Exercise and reference answers

Questions

1. Answer

   Payback method

   Question

   Measures time to recoup an outlay.

   Choices

   1. Payback method
   2. Net present value

2. Answer

   Present value

   Question

   Abbreviated NPV.

   Choices

   1. Present value
   2. Payback period

3. Answer

   Internal rate

   Question

   Abbreviated IRR.

   Choices

   1. Internal rate
   2. Interest ratio

4. Answer

   Payback method

   Question

   Ignores the time value of money.

   Choices

   1. Payback method
   2. Internal rate

5. Answer

   Accounting rate

   Question

   Grouped with payback as non-time value.

   Choices

   1. Accounting rate
   2. Present value

6. Answer

   Payback method

   Question

   Based on expected annual cash flows.

   Choices

   1. Payback method
   2. Accounting rate

7. Answer

   Non-time value

   Question

   Examined first in the chapter order.

   Choices

   1. Non-time value
   2. Time value

Instructions

Tap the right answer to add a block. Too many mistakes and the tower falls.

Explanation