A Firm May Choose a Project with a Rapid Payback

question 2

Multiple Choice

A firm may choose a project with a rapid payback period rather than one with a larger net present value because:

• A)it may have a poor cash position and limited access to outside finance.
• B)no reason is necessary,as it would never happen.
• C)the payback period is a superior means of evaluating projects.
• D)the required rate of return may not be readily determinable.

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Definitions:

Commissions

Fees paid to salespersons or agents for facilitating sales, based on the value or volume of those sales.

Store Rent

The cost associated with leasing or renting a physical space for retail operations, recorded as an expense.

Operating Income

Operating income is the profit realized from a business's core operations, excluding costs and expenses related to financing and investment.

Liabilities Decreased

A reduction in the obligations or debts that a company owes to others, which can improve its financial position.