31.Accounting rate of return is the simplest capital budgeting method. It gives managers an estimate of how soon they will recover their initial investment.
32.The net present value capital budgeting method considers all estimated cash flows for the project's expected life.
33.In ranking choices with the break-even time (BET) method, the investment with the highest BET measure gets the highest rank.
34.Three widely used methods of comparing investment alternatives are payback period, net present value, and rate of return on average investment.
35.The payback method of evaluating an investment fails to consider how long the investment will generate cash inflows beyond the payback period.
36.Two investments with exactly the same payback periods are always equally valuable to an investor.
37.A disadvantage of an investment with a short payback period is that it will produce revenue for only a short period of time.
38.In calculating the rate of return on average investment, average investment should be calculated as (beginning book value + ending book value)/2.
39.The accounting rate of return uses cash flows in its calculation.
40.The payback method, unlike the net present value method, does not ignore cash flows after the point of cost recovery.