Question

Two methods of analyzing potential capital investmentslong dashpayback and accounting rate of returnlong dashignore the time value of money. True False

Answer 1

True

Step-by-step explanation:

Various methods are used to analyse and estimate capital investment. The most used and important method is the net present value, and it accounts for the time value of money. The two methods which do not account for the time value of money are Payback period and accounting rate of return. These two methods are considered vague, and wrong because they do not account for the time value of money.