The Discounted Payback Rule May Cause

question 42

Multiple Choice

The discounted payback rule may cause:

• A)projects with discounted payback periods in excess of the project's life to be accepted.
• B)the most liquid projects to be rejected in favor of less liquid projects.
• C)projects to be incorrectly accepted due to ignoring the time value of money.
• D)some projects with negative net present values to be accepted.
• E)some positive net present value projects to be rejected.

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Definitions:

Income Statement

A financial report that displays a company's revenues, expenses, and profits or losses over a specific period of time.

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.