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Title: What conflicts can arise between using discounted cash flow methods for capital budgeting decisions Post by: jerico on Mar 14, 2015 What conflicts can arise between using discounted cash flow methods for capital budgeting decisions and accrual accounting for performance evaluation? How can these conflicts be reduced?
Title: Re: What conflicts can arise between using discounted cash flow methods for capital budgeting decisi Post by: cyborg on Mar 15, 2015 Using accrual accounting to evaluate the performance of a manager may create conflicts with using discounted cash flow (DCF) methods for capital budgeting because frequently a project using a DCF method will not report strong operating income results in the early years of the project under accrual accounting. If this is the case, a manager might be tempted not to use DCF methods even though the decisions based on them might be in the best interests of the company over the long run. The conflict can be reduced by evaluating managers on a project-by-project basis and by looking at their ability to achieve the amounts and timing of forecasted cash flows.
Title: Re: What conflicts can arise between using discounted cash flow methods for capital budgeting decisions Post by: jerico on Mar 23, 2015 This solved my problem perfectly, thank you for your kind input.
Title: Re: What conflicts can arise between using discounted cash flow methods for capital budgeting decisions Post by: cyborg on Mar 23, 2015 I'm happy to help you, how luck with the others, I noticed you've posted a lot of questions.
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