AICPA Exam CPA-Business Topic 3 Question 80 Discussion

Actual exam question for AICPA's CPA-Business exam

Question #: 80
Topic #: 3

[All CPA-Business Questions]

All of the following are the rates used in net present value analysis, except for the:

ACost of capital.

BHurdle rate.

CDiscount rate.

DAccounting rate of return.

Show Suggested Answer

Suggested Answer: C

Choice 'c' is correct. The most logical sequence in planning and controlling capital expenditures is to begin with identifying capital addition projects and other capital needs.

Choice 'a' is incorrect. Analyzing capital addition proposals omits other capital needs.

Choice 'b' is incorrect. Analyzing and evaluating all promising alternatives is beyond the scope of planning and controlling capital expenditures.

Choice 'd' is incorrect. Developing capital budgets is the same as planning and controlling capital expenditures.

by Jovita at Jan 22, 2024, 03:00 PM

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Alaine

1 months ago

The accounting rate of return? Really? I'd be accounting for my time if I chose that option.

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Valda

2 days ago

A) Cost of capital.

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Leanora

1 months ago

Haha, the accounting rate of return? What is this, an accounting exam? NPV is all about those juicy discount rates, baby!

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Maile

13 days ago

B) Hurdle rate.

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Tanesha

15 days ago

A) Cost of capital.

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Mitsue

1 months ago

Ah, I see what they're getting at. The accounting rate of return is a measure of profitability, not a rate used in NPV. Good catch!

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Erasmo

4 days ago

C) Discount rate.

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Tequila

8 days ago

B) Hurdle rate.

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Corinne

12 days ago

A) Cost of capital.

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Carrol

2 months ago

I'm pretty sure the cost of capital, hurdle rate, and discount rate are all essential for NPV calculations. The accounting rate of return seems out of place here.

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