AICPA CPA-Business Exam - 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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Tony

5 months ago

Hurdle rate is definitely part of it, no doubt!

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Ligia

5 months ago

Cost of capital and discount rate are key for NPV.

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Zita

5 months ago

Wait, are we sure about that? Seems off.

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Verda

5 months ago

Totally agree, it's not a rate for NPV!

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Dorian

5 months ago

The accounting rate of return isn't used in NPV analysis.

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Refugia

6 months ago

I’m leaning towards D as the answer since it seems like the odd one out, but I hope I’m not mixing it up with something else!

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Herminia

6 months ago

I practiced a similar question where we had to identify rates, and I feel like the accounting rate of return doesn't fit with the others.

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Gaynell

6 months ago

I think the hurdle rate is definitely used in NPV calculations, but I might confuse it with the discount rate sometimes.

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Abel

6 months ago

I remember studying the different rates used in NPV analysis, but I'm not entirely sure about the accounting rate of return.

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Alberto

6 months ago

Wait, what's the difference between the cost of capital, hurdle rate, and discount rate again? I'm getting a little mixed up on the terminology here. I better review my notes before answering.

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Howard

6 months ago

Okay, I've got this. The accounting rate of return is a different metric than the ones used in NPV, so that's the answer that doesn't belong in the list. I feel confident about this one.

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Deane

6 months ago

Hmm, I'm a little unsure about this one. The cost of capital, hurdle rate, and discount rate all seem like they could be rates used in NPV analysis. I'll have to think this through carefully.

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Vashti

6 months ago

This one seems pretty straightforward. The question is asking about the rates used in net present value analysis, and the answer that is not one of those rates is the accounting rate of return.

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Lanie

6 months ago

Hmm, I'm not totally sure about this one. I'll have to think it through a bit more. Processes could be limited to just computer systems, so I'm not 100% confident in the True answer.

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Mabel

6 months ago

Hmm, I'm not entirely sure. Wouldn't Traffic Sources apply if we're tracking how users got to that URL instead?

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Evangelina

6 months ago

I remember similar practice questions where the output was based on how constructors were defined. Could it be that the program outputs 0 followed by 1?

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Nicholle

6 months ago

I definitely recall that CAs get notifications about lost private keys, right? Or maybe that was just a part of a broader discussion we had in class.

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Jamal

6 months ago

I think option B might be the right choice, but I'm not entirely sure if it meets all the requirements for navigation.

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Alaine

11 months ago

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

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Madalyn

9 months ago

D) Accounting rate of return.

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Shalon

9 months ago

C) Discount rate.

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Aleisha

10 months ago

B) Hurdle rate.

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Valda

10 months ago

A) Cost of capital.

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Leanora

11 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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Veda

10 months ago

C) Discount rate.

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Maile

10 months ago

B) Hurdle rate.

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Tanesha

10 months ago

A) Cost of capital.

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Mitsue

11 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

10 months ago

C) Discount rate.

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Tequila

10 months ago

B) Hurdle rate.

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Corinne

10 months ago

A) Cost of capital.

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Carrol

11 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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