Quiz Ch 08 – Assessing Profitability with the Average Accounting Return
Essentials of Corporate Finance
Ross, Westerfield, and Jordan
10th Edition
Which characteristic best describes the average accounting return metric?
Which characteristic best describes the average accounting return metric?
What assumption can be drawn about a project that demands an initial $100,000 investment at time zero and subsequently generates $20,000 each year for 5 years?
When firms utilize the payback rule for investment decisions, what type of projects might they exhibit a bias toward rejecting?
What analysis method exhibits the highest bias towards short-term projects?
What is the measure that represents the average net income of a project divided by its average book value?
If Mary has limited time to analyze an investment and must choose only one method, which method should she use to provide a quick assessment?
In the absence of capital rationing, which project should be chosen when a firm intends to use the profitability index to decide between two mutually exclusive investments?
In the context of mutually exclusive lending projects, where Project A has an IRR of 20% and Project B has an IRR of 30%, what conditions would make you more likely to opt for Project A over Project B?
In which scenario would the payback method be the most suitable method of analysis?
Under which circumstances is selecting the project(s) with the highest NPV(s) NOT the appropriate decision rule?