106) A post-investment audit of capital budgeting projects provides management with feedback about
the performance of a project so management can compare actual results to the costs and benefits
expected at the time the project was selected.
106)
107) Unlike the net present value method and the internal rate-of-return method, the payback method
does not distinguish between the origins of the cash flows.
107)
108) The net present value method can indicate erroneous decisions as it implicitly assumes that project
cash flows can be reinvested at the project's rate-of-return.
108)
109) It is possible to use the net present value in an analysis of customer profitability. 109)
110) The payback method allows for managers to highlight liquidity. 110)
111) The accrual accounting rate-of-return method has a significant weakness for use in making capital
budgeting decisions because it does not track cash flows and it ignores the time value of money.
111)
112) Deducting depreciation from operating cash flows would result in counting the initial investment
twice in a discounted cash flow analysis.
112)
113) The 'determine possible courses of action and consider the consequences of each' stage of the
capital budgeting process consists of forecasting all potential net profit additions that are
attributable to the alternative projects.
113)
114) The common discounted cash flow methods are net present value, internal rate of return, and
payback.
114)
115) A manager who uses discounted cash flow methods to make capital budgeting decisions does not
face goal-congruence issues if the accrual accounting rate of return is used for performance
evaluation.
115)
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