Which of the Following Is a Correct Statement About the Discounted

question 7

Multiple Choice

Which of the following is a correct statement about the discounted payback period (DPB) technique that is used to evaluate capital budgeting projects?

• A)To compute a project's DPB, simply add up the unadjusted expected cash flows for each year until the cumulative value equals the amount that is initially invested.
• B)According to DPB, a project should be accepted when its discounted payback period is greater than its useful life.
• C)The DPB does not provide information about the liquidity of a project.
• D)The DPB method considers the time value of money.
• E)To compute a project's DPB, its internal rate of return (IRR) must be known.

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Definitions:

1st Quartile

The 1st quartile, also known as the lower quartile, is a statistical measure that divides the lowest 25% of data in a dataset from the highest 75%.

3rd Quartile

The value below which 75% of the data in a dataset falls, marking the upper quartile in a distribution of values.

Negatively Skewed Distribution

A distribution where the tail on the left side of the probability density function is longer or fatter than the right side.

1st Quartile

The value below which 25% of the data falls, often used in statistics to measure the spread of a data set.