Which of the Following Statements Is CORRECT

question 101

Multiple Choice

Which of the following statements is CORRECT?

• A) The shorter a project's payback period,the less desirable the project is normally considered to be by this criterion.
• B) One drawback of the payback criterion is that this method does not take account of cash flows beyond the payback period.
• C) If a project's payback is positive,then the project should be accepted because it must have a positive NPV.
• D) The regular payback ignores cash flows beyond the payback period,but the discounted payback method overcomes this problem.
• E) One drawback of the discounted payback is that this method does not consider the time value of money,while the regular payback overcomes this drawback.

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Definitions:

Unit Sales

The quantity of products sold, typically measured on a per-unit basis.

Margin Of Safety

The difference between actual sales and the break-even point, indicating how much sales can fall before a business incurs a loss.

Net Operating Income

Earnings resulting from the standard operations of a business, without considering taxes and interest expenses.

Variable Cost

Expenses that vary directly with the level of production or sales volume, such as raw materials and direct labor costs.