Which of the Following Statements Is CORRECT

question 84

Multiple Choice

Which of the following statements is CORRECT?

• A) The regular payback method recognizes all cash flows over a project's life.
• B) The discounted payback method recognizes all cash flows over a project's life,and it also adjusts these cash flows to account for the time value of money.
• C) The regular payback method was,years ago,widely used,but virtually no companies even calculate the payback today.
• D) The regular payback is useful as an indicator of a project's liquidity because it gives managers an idea of how long it will take to recover the funds invested in a project.
• E) The regular payback does not consider cash flows beyond the payback year,but the discounted payback overcomes this defect.

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Definitions:

Commercial Paper

An unsecured, short-term debt instrument issued by corporations, typically used for the financing of accounts receivable, inventories, and meeting short-term liabilities.

Secondary Markets

Markets where securities are bought and sold after their initial issuance, allowing for liquidity and valuation of financial instruments.

Working Capital Financing Policy

Strategies a company uses to manage and finance its current assets and current liabilities to ensure it has sufficient liquidity to run its operations.

Net Working Capital

Current assets minus current liabilities.