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__ is a capital budgeting model that ignores the time value of money and focuses on the profitability of an investment project. 1. A) Payback model 2. B) Internal rate of return model 3. C) Accounting rate of return model 4. D) Real options model

Question

__ is a capital budgeting model that ignores the time
value of money and focuses on the profitability of an
investment project.
1. A) Payback model
2. B) Internal rate of return model
3. C) Accounting rate of return model
4. D) Real options model

__ is a capital budgeting model that ignores the time value of money and focuses on the profitability of an investment project. 1. A) Payback model 2. B) Internal rate of return model 3. C) Accounting rate of return model 4. D) Real options model

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VincentProfessional · Tutor for 6 years

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<p> C</p>

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<p> The question requires knowledge of capital budgeting models. Among the four mixture options,<br /><br />Option A) Payback model: Despite the fact that the Payback method serves as an ingenious barrier against loss, it fails to regard the time worth of money. Also, it primarily accords priority to fund recoupment rather than profitability.<br /> <br />Option B) Internal rate of return model (IRR): It primarily quantifies and calibrates the breakeven return rate of the investment projects it attends to. Therefore, the validity of IRR vastly depends upon the "time value" assumption.<br /><br />Option C) Accounting rate of return (ARR): is computing by taking the measure of agreed (usually by GAAP norms) accounting-generated profit derived from the operational output of investment and translating such into ratios against the capital outlay sourcing the investment. Thus, the scope of the represented financial impact doesn't extend over empirical cost (present, future or discounted)-benefit statistical dilution cause. Such seems perfectly consistent.<br /><br />Option D) Real options model: This model usually is hinged upon the current values of some project diverse differing feasible pecuniary alternatives. Thus, the time-cost canalization becomes very evident. Consequently, it tends to inherently create imputed biases for future values. Dependence on time inclusive considerations entails the use of cost by statistics of adjusting operational tactics.<br /><br />So, the most suitable match to answer since it bonafides the claim "ignores the time vanity of money and focusses on the profitability impact," is the C) Accounting Rate of Return model (ARD).<br /></p>
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