One of the benefit of the pay back period is that it focuses on the timing of the project`s benefits and costs, even though it does not adjust the cash flows for the time value of money Select one: True False

One of the benefit of the pay back period is that it focuses on the timing of the project`s benefits and costs, even though it does not adjust the cash flows for the time value of money Select one: True False

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter11: Cash Flow Estimation And Risk Analysis

Section11.1: Identifying Relevant Cash Flows

Problem 3ST

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

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The payback criterion has problem(s) like Select one: O A. It considers the time value of money O B. It ignores the cash outflows or inflows after the payback period and the time value of money O C. It considers the inflows and outflows after the Payback Period O D. It considers all the cash outflows or inflows of the project
This method solves for the interest rate that equates the equivalent worth of a project's cash outflows (expenditures) to the equivalent worth of cash inflows (receipts or savings). O A. Payback Period O B. Profitability Index O C. Rate of Return O D. MARR
Which of the following statements is correct regarding the payback method? Takes account of differences in size among projects. If a project’s payback is positive, then the project should be accepted because it must have a zero NPV. Ignores cash flows beyond the payback period. Has an objective, market-determined benchmark for making decisions. Directly account for the time value of money.
Payback period is the time in which the initial cost of an investment is expected to be recovered through the cash inflows generated by the investment. Briefly discuss the pros and cons of payback period?
Mathematically, we can determine the rate of return for a given project’s cash flow series by identifying an interest rate that equates the present worth of its cash flows to zero. Select one: True False and explain
Is it always necessary to adjust projects’ cash flows when different projects haveunequal lives? Explain.
Mathematically, how can we determine the rate of return for a project's cash flow?
Which of the following statements is true regarding the payback period? Multiple Choice It measures the length of time that it takes for a project to recover its initial cost from the discounted net cash inflows that it genera It measures the length of time that it takes for a project to recover its initial cost from the net cash inflows that it generates. It measures the length of time that it takes for a project to recover its initial cost from the incremental net operating income that It measures the length of time that it takes for a project to recover its initial cost from the discounted incremental net operating it generates.
Which are problems of the payback criterion? Check all that apply: It ignores cash flows after the cutoff date. It ignores the time value of money. It doesn't show the value created by a project. It doesn't fully reflect the risk of a project. It uses an arbitrary cutoff value. It is difficult to calculate.
How can the money released from a project be reinvested to yield a rate of return equal to that received from the project?
The ARR has one specific advantage not possessed by the payback period in that it a.considers the time value of money. b.measures the value added by a project. c.is always an accurate measure of profitability. d.is more widely accepted by financial managers. e.considers the profitability of a project beyond the payback period.
Which of the following statements concerning the payback period, is not true? a. The payback period measures the time that a project will take to generate enough cash flows to cover the initial investment.incorrect b. the payback period involves a simple method c. the payback period takes into account the time value of money d. the payback period ignores cash flows