Which of the Following Statements Is CORRECT

question 94

Multiple Choice

Which of the following statements is CORRECT?

• A) One drawback of the regular payback is that this method does not take account of cash flows beyond the payback period.
• B) If a project's payback is positive, then the project should be accepted because it must have a positive NPV.
• C) The regular payback ignores cash flows beyond the payback period, but the discounted payback method overcomes this problem.
• D) One drawback of the discounted payback is that this method does not consider the time value of money, while the regular payback overcomes this drawback.
• E) The shorter a project's payback period, the less desirable the project is normally considered to be by this criterion.

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Definitions:

Fixed Rate

An interest rate that remains constant over the duration of a loan or investment, as opposed to a variable or floating rate.

Money Supply

The entire pool of financial assets existing in an economy at a specific timeframe.

Gold Standard

A monetary system where a country's currency or paper money has a value directly linked to gold.

Convertible

A type of automobile with a flexible roof system that allows it to transform between an enclosed and an open-air form.