Question Details

ACC 162 Planning for capital investments PART 1

CHAPTER STUDY OBJECTIVES
1.	Discuss capital budgeting evaluation and explain inputs used in capital budgeting.	

2.	Describe the cash payback technique.	

3.	Explain the net present value method.	

4.	Identify the challenges presented by intangible benefits in capital budgeting	

5.	Describe the profitability index.	

6.	Indicate the benefits of performing a post-audit.  
	7.	Explain the internal rate of return method. The objective of the internal rate of return method is to find the interest yield of the potential investment, which is expressed as a percentage rate. The IRR decision rule is: Accept the project when the internal rate of return is equal to or greater than the required rate of return. Reject the project when the internal rate of return is less than the required rate of return.
	8.	Describe the annual rate of return method. The annual rate of return uses accrual accounting data to indicate the profitability of a capital investment. It is calculated as: Expected annual net income ÷ Amount of the average investment. The higher the rate of return, the more attractive the investment.