Which of the following is NOT a disadvantage of the Payback Period project evaluation method? Select one: a. It does not focus on cash flow as the driver of value. b. It has an arbitrary cut-off point set by management. c. It does not adequately allow for risk. d. It fails to take account of the time value of money.

Which of the following is NOT a disadvantage of the Payback Period project evaluation method? Select one: a. It does not focus on cash flow as the driver of value. b. It has an arbitrary cut-off point set by management. c. It does not adequately allow for risk. d. It fails to take account of the time value of money.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 20E

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Which of the following is a disadvantage of the IRR project evaluation method? Select one: a. It does not take into account the time value of money. b. If there are negative cash flows after positive cash flows, there may be zero or multiple internal rates of return. c. It does not make adequate allowance for risk. d. It focuses on accounting profit rather than cash flow as the source of value.
Which of the following are significant flaws with the Payback Period Method? (Select all that apply) A. Biased against long-term projects B. Uses an arbitrary benchmark C. Very rarely used in practice D. Uses accounting profits rather than cash flows E. Ignores Time Value of Money
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.
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.
3. 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. Answer One drawback of the regular payback for evaluating projects is that this method does not properly account for the time value of money. If a project's payback is positive, then the project should be rejected because it must have a negative NPV. The regular payback ignores cash flows beyond the payback pericod, but the discounted payback method overcomes this problem. 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. The longer a project's payback period, the more desirable the project is normally considered to be by this criterion.
A unique feature of the analysis of a replacement decision is that Group of answer choices a. the analysis considers total rather than differential costs. b. the amount used as the cost of the investment is not likely to equal the price to be paid for the new asset. c. the time value of money is ignored. d. such decisions seldom involve cash flows.
Question 1 Which of the following statements is False regarding the payback period method: OA. Use as a tool in making screening decision. OB. The Cash flows after the payback period are ignored. OC. Shorter payback period indicates a more profitable project. O D. Consider the time value of money.
Which of the following is correct? • the shorter a projects payback period, the less desirable the project is normally considered to be by this criterion • one drawback of the payback criterion is that this method does not take account of cash flows beyond the payback period. • if a projects payback is postitive, then the project should be accepted because it must have a positive NPV • the regular payback ignores cash flows beyond the payback period, but the discounted payback method overcomes this problem •one drawback of the discounted payback is that this method does not consider the time value of money, while the regular payback overcomes this drawback.
Is this statement ture or false? Requiring a relative short pay-back period for projects indicates a high risk avoiding propensity within the organisation
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
12. Discuss what impact will an inaccurate progress estimate have on cash flow? 13. Discuss the reasons change order work costs more than work in the original scope?
is this statement true or false? and why? Requiring a relative short pay-back period for projects indicates a high-risk avoiding propensity within the organisation