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

question 21

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 regular payback 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:

Personal Desires

Individual's inner wishes or aspirations that motivate behavior towards achieving personal goals.

Submissive

A personality trait or behavior characterized by a willingness to conform to the authority or will of others.

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A concept in evolutionary biology describing the conflict between the reproductive interests or strategies of males and females, leading to evolutionary arms races between sexes.

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A disposition to regard anything short of perfection as unacceptable, often leading to stress or dissatisfaction.