Which of the following statements is CORRECT? Assume that the project being cons

Question

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. The regular payback ignores cash flows beyond the payback period, but the discounted payback method overcomes this problem. b. One drawback of the payback criterion for evaluating projects is that this method does not properly account for the time value of money. c. 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. d. The longer a project's payback period, the more desirable the project is normally considered to be by this criterion. e. If a project's payback is positive, then the project should be rejected because it must have a negative NPV.

Explanation / Answer

The correct answer is :-

E.  If a project's payback is positive, then the project should be rejected because it must have a negative NPV.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.