If the Present Value Payback Period Is Less Than the Life

question 89

Multiple Choice

If the present value payback period is less than the life of the project, one may conclude that:

• A)The project's internal rate of return (IRR) is less than the discount (hurdle) rate.
• B)The project's accounting (book) rate of return exceeds the discount (hurdle) rate.
• C)The project is not desirable in a present-value sense.
• D)The project's net present value (NPV) is positive.
• E)The project's IRR is equal to the weighted-average cost of capital.

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Definitions:

Raw Materials Inventory

The total cost of all components and materials that are held by a company and intended for use in the production of goods.

Conversion Costs

Costs associated with converting raw materials into finished goods, typically including labor and overhead expenses.

Finished Goods

Goods that have finished the production process and are prepared for purchase by customers.

Capitalized

The process of recording an expenditure as an asset, rather than an expense, allowing it to be expensed over time through depreciation or amortization.