Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

10. Time Value of Money

Time Value of Money Equations

Financial Accounting

10. Time Value of Money

Time Value of Money Equations

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Multiple Choice

Which of the following are present value methods used to analyze capital investment proposals?

Internal Rate of Return (IRR)

Net Present Value (NPV)

Payback Period

Accounting Rate of Return (ARR)

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Verified step by step guidance

Step 1: Understand the concept of present value methods. Present value methods are techniques used to evaluate the profitability of capital investment proposals by considering the time value of money. These methods focus on discounting future cash flows to their present value.

Step 2: Identify the methods listed in the problem. The methods mentioned are Internal Rate of Return (IRR), Net Present Value (NPV), Payback Period, and Accounting Rate of Return (ARR).

Step 3: Analyze each method to determine if it is a present value method. IRR and NPV are present value methods because they involve discounting future cash flows to their present value using a discount rate. Payback Period and ARR do not consider the time value of money, so they are not classified as present value methods.

Step 4: Clarify why IRR and NPV are considered present value methods. IRR calculates the discount rate at which the net present value of cash flows equals zero, while NPV calculates the difference between the present value of cash inflows and outflows using a specific discount rate.

Step 5: Conclude that the correct present value methods from the list are Internal Rate of Return (IRR) and Net Present Value (NPV), as they incorporate the time value of money in their analysis.