Calculation Of Payback Period
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Question
1. Which of the following is NOT a limitation of the payback rule?
A. It does not consider the time value of money
B. It lacks a decision criterion that is economically based
C. It is difficult to calculate
D. It does not consider cash flows occurring after the payback period
2. Consider the following two projects.
|
Project |
Year 0 Cash Flow |
Year 1 Cash Flow |
Year 2 Cash Flow |
Year 3 Cash Flow |
Year 4 Cash Flow |
Discount Rate |
|
A |
-100 |
40 |
50 |
60 |
NA |
0.15 |
|
B |
-73 |
30 |
30 |
30 |
30 |
0.15 |
The payback period for project B is closest to:
A. 2.5 years
B. 2.0 years
C. 2.2 years
D. 2.4 years
Summary
These short questions belong to Finance. The 1st question is about the limitation of payback rule and the 2nd question is about finding the payback period for a project.
Total Word Count NA
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