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

question 60

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:

Poor Societies

Communities or populations characterized by a low standard of living, limited economic opportunities, and insufficient access to resources.

Unlimited Resources

A hypothetical scenario in which all resources are abundant and easily accessible, eliminating scarcity.

Wealthy Society

A society characterized by a high level of economic riches, lifestyle quality, and available resources for its members.

Microeconomics

The branch of economics that focuses on the actions of individuals and industries, like the dynamics between buyers and sellers, market equilibriums, and the effect of government regulations.