Which of the Following Is a Reason for Firms Not

question 93

Multiple Choice

Which of the following is a reason for firms not using the payback method as a guideline in capital investment decisions?

• A) It gives an explicit consideration to the timing of cash flows.
• B) It cannot be specified in light of the wealth maximization goal.
• C) It is a measure of risk exposure and projects the possibility of a calamity.
• D) It is easy to calculate and has intuitive appeal.

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Definitions:

Corporate Tax Rate

The percentage of a company's taxable income that it pays to federal, state, or local tax authorities.

Demand Shock

An event that affects the demand for goods and services in the economy.

Money Supply

The sum of all financial assets present in an economy at a given time, encompassing cash, coins, and the amounts in checking and savings accounts.

Government Spending

Expenditures made by public authorities on goods, services, and public works, which can influence economic activity.