Use the information below to answer the following question(s).Jupiter Ltd.wants to automate one of its production processes.The new equipment will cost $90,000.In addition, Jupiter will incur installation and testing costs of $5,000 and $4,500 respectively.The expected life of the equipment is 5 years and the salvage value of the equipment is estimated at $12,000.The annual cash savings are estimated at $29,000.The company uses straight-line depreciation and has a required rate of return of 9%.Ignore income taxes.
-Which of the following is TRUE concerning capital budgeting analysis?
A)The IRR and AARR consider the time value of money.
B)The payback method and the AARR both consider profitability.
C)NPV and IRR consider accruals.
D)The payback method and the AARR both consider profitability, and NPV and IRR do not consider accruals.
E)NPV and IRR do not consider accruals, and the IRR considers the time value, but AARR does not.

Question

Quizplus · Accepted Answer

NPV and IRR do not consider accruals as they focus on cash flows. IRR considers the time value of money, while AARR does not, as it is based on accounting profits rather than cash flows.

Use the Information Below to Answer the Following Question(s)