Based on the Payback Rule, Which of the Following Is

question 271

Multiple Choice

Based on the payback rule, which of the following is false?

• A) With a payback cutoff of 1.5 years, both projects are unacceptable.
• B) With a payback cutoff of three years, both projects are acceptable.
• C) With a payback cutoff of one year, neither project is acceptable.
• D) Since both projects pay back, the NPV of both must be positive.
• E) You would be indifferent between the two projects.

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Definitions:

Price of Labor

The wage rate or compensation paid to employees for their work or services, often determined by market forces, skill levels, and economic conditions.

Isocost Lines

Lines on a graph representing all combinations of inputs that have the same total cost.

General Formula

A broadly applicable equation or rule that can be used in various situations to calculate a value or predict outcomes.

Slope

Slope is a measure of the steepness, incline, or grade of a line, often represented mathematically as the ratio of rise over run in the context of a graph.