The Refinancing Decision Is Sometimes Oversimplified into a Few "Rules

question 38

Multiple Choice

The refinancing decision is sometimes oversimplified into a few "rules of thumb" that a borrower uses in order to gauge its potential benefits. Which of the following methodologies is criticized for its inability to account for a variation in refinancing benefits due to cost or holding period differences?

• A) Payback period approach
• B) Net benefit approach
• C) Interest rate spread
• D) Net present value approach

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