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

question 28

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) One drawback of the regular payback for evaluating projects is that this method does not properly account for the time value of money.
• B) If a project's payback is positive, then the project should be rejected because it must have a negative NPV.
• C) The regular payback ignores cash flows beyond the payback period, but the discounted payback method overcomes this problem.
• D) 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.
• E) The longer a project's payback period, the more desirable the project is normally considered to be by this criterion.

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Definitions:

Nematocyst

In cnidarians, a capsule that contains a threadlike fiber, the release of which aids in the capture of prey.

Bilateral Development

The process of embryonic development where the organism develops with a symmetrical right and left side.

Radial Development

Growth or expansion that spreads out uniformly in all directions from a central point, often used to describe the growth pattern of cities or tumors.

Stinging Cells

Specialized cells found in some animals, such as jellyfish, that contain a stinging structure used for capturing prey or defense.