21.When straight-line depreciation is used, the average carrying value of an asset with no salvage value is equal to the asset's original cost divided by its estimated useful life.
22.The return on average investment computation ignores the timing of an investment's future cash flows.
23.In capital budgeting, the investment proposal with the shortest payback period always has the highest rate of return.
24.In considering investment in new plant assets, the payback period is computed without regard to the total useful life of the investment.
25.A short payback period is preferred so that the investment's costs can be put to other uses.
26.The net present value of an investment proposal is the difference between the total present value of future net cash flows and the cost of the investment.
27.When the net present value is greater than zero, the investment's rate of return is less than the discount rate.
28.The recognition of depreciation expense often causes the annual net income of an investment to be less than the amount of its annual net cash flows.
29.The discount rate used in discounting cash flows from proposed investments is usually the rate of return required by the investor.
30.When an investment fails to provide the desired rate of return, the investment should be rejected.
31.The higher the required rate of return of an investment, the less an investor will be willing to pay for the investment.
32.Results of capital budgeting processes may have serious implications for employees.
33.The reliability of estimates is a critical factor in capital budget proposals.
34.Capital budget audits are often undertaken to ensure the accuracy of cash flow estimates.