How is depreciation handled by the following capital budgeting techniques? (Ignore income taxes in this problem.)
$\begin{array}{|l|l|l|}
\hline \text { Internal Rate of Return } & \text { Simple Rate of Return } & \text { Payback } \
\hline \text { A) Excluded } & \text { Included } & \text { Excluded } \
\hline \text { B) Included } & \text { Excluded } & \text { Included } \
\hline \text { C) Excluded } & \text { Excluded } & \text { Included } \
\hline
\end{array}$
$\begin{array}{|l|l|l|}
\hline \text {D) Included }&\text { Included}&\text {Excluded }\
\hline
\end{array}$

Question

How is depreciation handled by the following capital budgeting techniques? (Ignore income taxes in this problem.)
$\begin{array}{|l|l|l|}
\hline \text { Internal Rate of Return } & \text { Simple Rate of Return } & \text { Payback } \
\hline \text { A) Excluded } & \text { Included } & \text { Excluded } \
\hline \text { B) Included } & \text { Excluded } & \text { Included } \
\hline \text { C) Excluded } & \text { Excluded } & \text { Included } \
\hline
\end{array}$
$\begin{array}{|l|l|l|}
\hline  \text {D) Included }&\text { Included}&\text {Excluded }\
\hline 
\end{array}$

Quizplus · Accepted Answer

Depreciation is excluded in the Internal Rate of Return and Payback methods as they focus on cash flows, not accounting profits. It is included in the Simple Rate of Return as it affects accounting income.

How Is Depreciation Handled by the Following Capital Budgeting Techniques