Which of the Following Statements Is CORRECT? Assume That the Project

question 62

Multiple Choice

Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows,with one outflow followed by a series of inflows.

• A) The longer a project's payback period,the more desirable the project is normally considered to be by this criterion.
• B) One drawback of the payback criterion for evaluating projects is that this method does not properly account for the time value of money.
• C) If a project's payback is positive,then the project should be rejected because it must have a negative NPV.
• D) The regular payback ignores cash flows beyond the payback period,but the discounted payback method overcomes this problem.
• E) If a company uses the same payback requirement to evaluate all projects,say it requires a payback of 4 years or less,then the company will tend to reject projects with relatively short lives and accept long-lived projects,and this will cause its risk to increase over time.

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Definitions:

CS-US Pairings

A term from classical conditioning theory referring to the repeated association of a conditioned stimulus (CS) with an unconditioned stimulus (US).

Magnitude

The size, extent, or dimensions of something, often used to describe the intensity or severity of an entity or event.

Response

A reaction or answer provided after receiving stimuli or information.

Dishabituation

An increase in responsiveness when something novel is presented, following a series of presentations of something familiar.