Which of the following is NOT a reason for evaluating subunits over a multi-year time horizon?
A) Benefits of actions taken in the current period may not show up in a short-term performance measure.
B) Managers may curtail R & D or plant maintenance in order to increase short-term results.
C) Investments may actually decrease ROI and or RI in the short-term.
D) The NPV of the cash flows over the life of an investment equals [total assets ÷ ROI].
E) Investments may actually decrease ROI and or RI in the short-term, and benefits of actions taken in the current period may not show up in a short-term performance measure.

Question

Quizplus · Accepted Answer

The correct answer is D because the NPV (Net Present Value) of cash flows over the life of an investment is not calculated as [total assets ÷ ROI]. NPV involves discounting future cash flows to their present value, not dividing total assets by the return on investment (ROI).

Which of the Following Is NOT a Reason for Evaluating