Which one of the following is a project acceptance indicator given an

Which one of the following is a project acceptance

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18. Which one of the following is a project acceptance indicator given an independent project with investing type cash flows? A. profitability index less than 1.0 B. project's internal rate of return less than the required return C. discounted payback period greater than requirement D. average accounting return that is less than the internal rate of return E.modified internal rate of return that exceeds the required return Refer to sections 9.3 through 9.6 AACSB: N/A Bloom's: Comprehension Difficulty: Basic Learning Objective: 9-6 Section: 9.3 through 9.6 Topic: Decision rules
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19. Why is payback often used as the sole method of analyzing a proposed small project? Refer to section 9.2 AACSB: N/A Bloom's: Comprehension Difficulty: Basic Learning Objective: 9-2 Section: 9.2 Topic: Payback 20. Which of the following are advantages of the payback method of project analysis? I. works well for research and development projects II. liquidity bias III. ease of use IV. arbitrary cutoff point Refer to section 9.2 AACSB: N/A Bloom's: Knowledge Difficulty: Basic Learning Objective: 9-2 Section: 9.2 Topic: Payback advantages
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21. Samuelson Electronics has a required payback period of three years for all of its projects. Currently, the firm is analyzing two independent projects. Project A has an expected payback period of 2.8 years and a net present value of $6,800. Project B has an expected payback period of 3.1 years with a net present value of $28,400. Which projects should be accepted based on the payback decision rule? Refer to section 9.2 AACSB: N/A Bloom's: Comprehension Difficulty: Basic Learning Objective: 9-2 Section: 9.2 Topic: Payback decision rule 22. A project has a required payback period of three years. Which one of the following statements is correct concerning the payback analysis of this project? A. The cash flows in each of the three years must exceed one-third of the project's initial cost if the project is to be accepted. B. The cash flow in year three is ignored. C. The project's cash flow in year three is discounted by a factor of (1 + R)3. D.The cash flow in year two is valued just as highly as the cash flow in year one. E. The project is acceptable whenever the payback period exceeds three years. Refer to section 9.2 AACSB: N/A Bloom's: Comprehension Difficulty: Basic Learning Objective: 9-2 Section: 9.2 Topic: Payback
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