# Consider the following statements about capital

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Consider the following statements about capital budgeting.

a.___ is (are) often used by management to screen potential investments from those less desired.

b.___ does not consider the assetâ€™s profitability.

c.___ is calculated by dividing the average amount invested by the assetâ€™s average annual operating income.

d.___ is the rate of return, using discounted cash flows, a company can expect to earn by investing in the asset.

e.___ In capital rationing decisions, the profitability index must be computed to compare investments requiring different initial investments when the method is used.

f.___ ignores any residual value.

g.___ is the interest rate that makes the NPV of an investment equal to zero.

h.___ highlights risky investments.

i.___ shows the effect of the investment on the companyâ€™s accrual-based income.

Requirement

1. Fill in each statement with the appropriate capital budgeting method: Payback period, ROR, NPV, or IRR.

a.___ is (are) often used by management to screen potential investments from those less desired.

b.___ does not consider the assetâ€™s profitability.

c.___ is calculated by dividing the average amount invested by the assetâ€™s average annual operating income.

d.___ is the rate of return, using discounted cash flows, a company can expect to earn by investing in the asset.

e.___ In capital rationing decisions, the profitability index must be computed to compare investments requiring different initial investments when the method is used.

f.___ ignores any residual value.

g.___ is the interest rate that makes the NPV of an investment equal to zero.

h.___ highlights risky investments.

i.___ shows the effect of the investment on the companyâ€™s accrual-based income.

Requirement

1. Fill in each statement with the appropriate capital budgeting method: Payback period, ROR, NPV, or IRR.

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