If the Present Value Payback Period Is Less Than the Life

question 68

Multiple Choice

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

• A)The project's 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 is positive.

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Definitions:

Fixed Manufacturing Cost

Costs that do not change with the level of production, such as rent, salaries, and insurance.

Fixed Manufacturing Cost

Expenses that do not change with the level of production, such as rent, salaries, and equipment depreciation in a manufacturing setting.

Production Volume

The amount of products a factory or plant has manufactured in a given time frame; it measures the output level of production activities.

Factory Utility Cost

The expense associated with the utilities consumed in the production process, such as electricity, gas, and water.