A manager who uses discounted cash flow methods to make capital budgeting decisions does NOT face goal-congruence issues if the accrual accounting rate of return is used for performance evaluation.

Question

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The use of the accrual accounting rate of return for performance evaluation may lead to goal-congruence issues as the manager may prioritize short-term profitability over long-term value creation. This can be conflicting with the objective of discounted cash flow analysis which focuses on long-term value creation.

A Manager Who Uses Discounted Cash Flow Methods to Make