Which of the following are considered weaknesses in the average accounting return method of project analysis?

Applying the discounted payback decision rule to all projects may cause:    A.  some positive net present value projects to be rejected. B.  the most liquid projects to be rejected in favor of the less liquid projects. C.  projects to be incorrectly accepted due to ignoring the time value of money. D.  a firm to become more long-term focused. E.  some projects to be accepted which would otherwise be rejected under the payback rule. Refer to section 9.3

26.

Which one of the following correctly applies to the average accounting rate of return?    A.  It considers the time value of money. B.  It measures net income as a percentage of the sales generated by a project. C.  It is the best method of analyzing mutually exclusive projects from a financial point of view. D.  It is the primary methodology used in analyzing independent projects. E.  It can be compared to the return on assets ratio. Refer to section 9.4

27.

Which one of the following is an advantage of the average accounting return method of analysis?    A.  easy availability of information needed for the computation B.  inclusion of time value of money considerations C.  the use of a cutoff rate as a benchmark D.  the use of pre-tax income in the computation E.  use of real, versus nominal, average income Refer to section 9.4

28.

Which of the following are considered weaknesses in the average accounting return method of project analysis? I. exclusion of time value of money considerations II. need of a cutoff rate III. easily obtainable information for computation IV. based on accounting values    A.  I only B.  I and IV only C.  II and III only D.  I, II, and IV only E.  I, II, III, and IV Refer to section 9.4