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Managerial Accounting week 8 P20-31b

Managerial Accounting week 8 P20-31b - f Payback period...

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P20-31B Matthew Schweizer a. NPVand IRR work well for capital investments with a relatively short life span. b. Payback period highlights risky investments. c. ARR uses acural accounting income rather than net cash flows in its computation. d. IRR uses discounted cash to determin the assets unique rate of return. e. In capital rationing decisions, management must identify the required rate of return when the NPV method is used.
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Unformatted text preview: f. Payback period provides management with the information on how fast the cash invested will be recouped. g. IRR finds the discount rate which brings the investment's NPV to zero. h. Payback period does not consider the asset's profitability. i. ARR is calculated by dividing the avergae amount invested by the asset's average annual operating income....
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