11.To determine the average investment over the life of an asset, divide the total depreciation of the investment by two.
12.The present value of a future cash flow is the amount you would pay today for the right to receive that future amount.
13.The payback period analysis fails to consider the cash flows over the entire life of the investment.
14.A failure of the return on average investment method is that no consideration is given to the time value of money.
15.The present value of money is always less than its future value.
16.The difference between the present value and future value depends on the rate of interest and the length of time that interest accumulates.
17.The residual value of an asset should be subtracted from the cost of the asset when determining the average amount invested.
18.In capital budgeting, one may use estimates in making decisions.
19.Perhaps the most important financial considerations in a capital budgeting decision are its effects upon future cash flow and future profitability.
20.The payback period considers total profitability over the life of an investment and takes into consideration the timing of an investment's future cash flows.