Knowee
Questions
Features
Study Tools

Select Any One Of the Following Options: Which of the following criteria for evaluating a capital budgeting proposal does not consider the time value of money?Payback periodNPVProfitability indexIRR

Question

Select Any One Of the Following Options: Which of the following criteria for evaluating a capital budgeting proposal does not consider the time value of money?Payback periodNPVProfitability indexIRR

🧐 Not the exact question you are looking for?Go ask a question

Solution

The criterion for evaluating a capital budgeting proposal that does not consider the time value of money is the Payback period.

Here's why:

  1. Payback period: This is the amount of time it takes for an investment to generate an amount of money equal to the original investment. It does not take into account the time value of money, which is the concept that money available today is worth more than the same amount in the future due to its potential earning capacity.

  2. Net Present Value (NPV): This method does consider the time value of money. It calculates the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

  3. Profitability Index: This also considers the time value of money. It is a ratio of the present value of future cash flows to the initial investment.

  4. Internal Rate of Return (IRR): This is the discount rate that makes the NPV of all cash flows (both positive and negative) from a project equal to zero. It also takes into account the time value of money.

This problem has been solved

Similar Questions

Of the four capital budgeting methods, which ones reflect the time value of money? (Check all that apply).Multiple select question.accounting rate of returnnet present valueinternal rate of returnpayback period

Which capital budgeting technique is best suited for evaluating projects of unequal duration?  A. Payback Period  B. Net Present Value (NPV)  C. Internal Rate of Return (IRR)  D. Profitability Index (PI)

Multiple Choice QuestionThe capital budgeting evaluation method that measures the expected amount of time to recover the initial investment amount is the:Multiple choice question.net present value.accounting rate of return.payback period.internal rate of return.

Which one among the following is not a required component of a capital-budgeting decision?Group of answer choicesA decision ruleA numeric measureA benchmarkA scaleNone of the other choices are correct.

Which is not a process in capital budgeting?Select one:a.Evaluation and selling of proposalsb.Performance Review c.Screening or Matching the Proposalsd.Identification of Various Investment Proposals

1/3

Upgrade your grade with Knowee

Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.