Firms That Make Investment Decisions Based on the Payback Rule

question 85

Multiple Choice

Firms that make investment decisions based on the payback rule may be biased toward rejecting projects:

• A) with short lives.
• B) with long lives.
• C) with late cash inflows.
• D) that have negative NPVs.

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Definitions:

Variability of Lead Time

The fluctuation in the time taken for each stage of a process from start to completion, often causing delays in delivery.

Reliable Supplier

A reliable supplier consistently provides quality products or services on time, meeting the requirements of the purchasing organization.

Design Collaboration

A process where multiple stakeholders work together in the planning and creation of a product, service, or system, often leveraging diverse expertise.

Lowest Possible Price

The minimum price at which a good or service can be sold, often reflecting the lowest sustainable cost of production or providing a service without incurring a loss.