Which of the Following Statements Is CORRECT? Assume That the Project

question 73

Multiple Choice

Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows.

• A) one drawback of the regular payback for evaluating projects is that this method does not properly account for the time value of money.
• B) if a project's payback is positive, then the project should be rejected because it must have a negative npv.
• C) the regular payback ignores cash flows beyond the payback period, but the discounted payback method overcomes this problem.
• D) if a company uses the same payback requirement to evaluate all projects, say it requires a payback of 4 years or less, then the company will tend to reject projects with relatively short lives and accept long-lived projects, and this will cause its risk to increase over time.
• E) the longer a project's payback period, the more desirable the project is normally considered to be by this criterion.

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Definitions:

Total Liabilities

The sum of all financial obligations a company owes to outside parties, including debts and other financial commitments.

Return on Total Assets

A financial ratio that measures a company's ability to generate net income from its total assets, indicating efficiency in asset use.

Total Assets

The sum of all resources owned by a company, valued and reported on the balance sheet, representing the total wealth of the company.

Income Statement

A financial record presenting the financial performance of a company, including its income, expenses, and profit, within a set period.