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:

Nonunion Workers

Employees who are not members of a labor union and do not have their employment terms negotiated collectively.

Union Density

The ratio of workers who are union members to the total number of workers in a given region or sector, indicative of the strength and reach of labor unions.

Labor Law

A body of laws, administrative rulings, and precedents which address the legal rights of, and restrictions on, working people and their organizations.

Efficiency

In an economic context, the optimal allocation and use of resources to achieve the best possible output or outcome with minimal waste.