Evaluate the Following Projects Using the Payback Method Assuming a Rule

question 134

Multiple Choice

Evaluate the following projects using the payback method assuming a rule of 3 years for payback.

• A) Project A can be accepted because the payback period is 2.5 years but Project B can not be accepted because it's payback period is longer than 3 years.
• B) Project B should be accepted because even thought the payback period is 2.5 years for project A and 3.001 project B, there is a $1,000,000 payoff in the 4th year in Project B.
• C) Project B should be accepted because you get more money paid back in the long run.
• D) Both projects can be accepted because the payback is less than 3 years.

Understand the concept of the comparison universe in mutual fund evaluation.

Identify factors affecting mutual fund performance, including beta adjustments during market advances or declines.

Calculate geometric and arithmetic average returns.

Understand the concept of serial correlation in mutual funds and hedge funds.

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