Asked by jennifer ocampo on Jul 11, 2024
Verified
If the straight-line depreciation method is used, the annual average investment amount used in calculating rate of return is calculated as (beginning book value + ending book value)/2.
Annual Average Investment
The mean amount of funds invested over a certain period, typically used to calculate the return on investment over that period.
- Acquire knowledge on the basic aspects of capital budgeting, highlighting the significance and effects of internal rate of return and net present value.
- Understand the importance of considering the time value of money in making investment decisions.
Verified Answer
AA
Akash AulakhJul 16, 2024
Final Answer :
True
Explanation :
This is correct according to the straight-line depreciation method, which assumes that the value of an asset decreases equally over its lifespan. Therefore, the average investment amount would be calculated as the beginning book value (cost of the asset) plus the ending book value (residual value) divided by 2.
Learning Objectives
- Acquire knowledge on the basic aspects of capital budgeting, highlighting the significance and effects of internal rate of return and net present value.
- Understand the importance of considering the time value of money in making investment decisions.
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