If a Payback Period for a Project Is Greater Than

question 150

Multiple Choice

If a payback period for a project is greater than its expected useful life, the

• A) project will always be profitable.
• B) entire initial investment will not be recovered.
• C) project would only be acceptable if the company's cost of capital was low.
• D) project's return will always exceed the company's cost of capital.

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Definitions:

Net Purchases

The total cost of purchases made by a company after deducting any returns, allowances, and discounts.

Cost of Goods Sold

The immediate expenses linked to manufacturing goods for sale within a business, encompassing both materials and workforce costs.

Credit Sales Transactions

Transactions where goods or services are sold to a customer with an agreement that payment will be made at a later date.

Perpetual Inventory System

An accounting method that records inventory purchases and sales in real-time, continuously updating inventory balances.