Which of the following statements is false? (a) If the payback period is less than the maximum acceptable payback period, accept the project. (b) If the payback period is greater than the maximum acceptable payback period, reject the project. (c) If the payback period is less than the maximum acceptable payback period, reject the project (d) Two of the above.
Which of the following statements is false? (a) If the payback period is less than the maximum acceptable payback period, accept the project. (b) If the payback period is greater than the maximum acceptable payback period, reject the project. (c) If the payback period is less than the maximum acceptable payback period, reject the project (d) Two of the above.
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 4Q
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2. Which of the following statements is false?
(a) If the payback period is less than the maximum acceptable payback period, accept the project.
(b) If the payback period is greater than the maximum acceptable payback period, reject the project. (c) If the payback period is less than the maximum acceptable payback period, reject the project
(d) Two of the above.
3. Should Pharms company accept a new project if its maximum payback is 3.5 years and its initial cost is P5,000,000 and it is expected to provide operating cash inflows of P1,800,000 in year 1, P900,000 in year 2, P600,000 in year 3 and P1,800,000 in year 4?
(a) Yes.
(c) It depends.
(b) No. 4.
(d) None of the above.
4. What is the NPV for the following project if its cost of capital is 15 percent and its initial cost is P5,000,000 and it is expected to provide operating cash inflows of P1,800,000 in year 1, P900,000 in year 2, P600,000 in year 3 and P1,800,000 in year 4?
(a) P1,700,000
(b) P371,764
(c) (P137,053)
(d) (P1,330,588)
5. Consider the following projects, X and Y, where the firm can only choose one. Project X costs P6,000,000 and has cash flows of P4,000,000 in each of the next 2 years. Project Y also costs P6,000,000 and generates cash flows of P5,000,000 and P3,000,000 for the next 2 years, respectively. Which investment should the firm choose if the cost of capital is 22 percent?
(a) Project X.
(b) Project Y.
(d) Not enough information to tell
(c) Neither.
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