If Project a Has a Lower Payback Period Than Project

question 76

Multiple Choice

If project A has a lower payback period than project B, this may indicate that project A may have a

• A) lower NPV and be less profitable.
• B) higher NPV and be less profitable.
• C) higher NPV and be more profitable.
• D) lower NPV and be more profitable.

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Definitions:

Rate of Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment's initial cost.

Capital Budgeting Decisions

The process of making investment decisions in long-term assets and projects, based on their expected cash flows and potential for returns.

Cash Inflows

The total amount of money being received by a company from its various business activities, such as sales revenue, investments, and loans.

Cash Outflows

Cash outflows represent money leaving a business, covering expenses like payroll, rent, materials, and other operational costs, crucial for cash flow management.