Defining capital investment terms Fill in each statement with the appropriate capital investment analysis method: Payback, ARR, NPV, or IRR. Some statements may have more than one answer. a. —–— is (are) more appropriate for long-term investments. b. —–— highlights risky investments. c. —–— shows the effect of the investment on the company’s accrual-based income. d. —–— is the interest rate that makes the NPV of an investment equal to zero. e. —–— requires management to identify the discount rate when used. f. —–— provides management with information on how fast the cash invested will be recouped. g. —–— is the rate of return, using discounted cash flows, a company can expect to earn by investing in the asset. h. —–— does not consider the asset’s profitability. i. —–— uses accrual accounting rather than net cash inflows in its computation.

Defining capital investment terms

Fill in each statement with the appropriate capital investment analysis method: Payback, ARR, NPV, or IRR. Some statements may have more than one answer.

a. —–— is (are) more appropriate for long-term investments.

b. —–— highlights risky investments.

c. —–— shows the effect of the investment on the company’s accrual-based income.

d. —–— is the interest rate that makes the NPV of an investment equal to zero.

e. —–— requires management to identify the discount rate when used.

f. —–— provides management with information on how fast the cash invested will be recouped.

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

h. —–— does not consider the asset’s profitability.

i. —–— uses accrual accounting rather than net cash inflows in its computation.