The payback rule is biased in favor of short-term projects

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Reference no: EM131188262

1. Which one of the following statements is incorrect?

When the internal rate of return is greater than the required return, the net present value is positive.

If the IRR exceeds the required return, the profitability index will be more than 1.0.

Projects with conventional cash flows have multiple internal rates of return.

If two projects are mutually exclusive, you should select the project with the highest net present value.

The profitability index will be greater than 1.0 when the net present value is positive.

2. Which one of the following statements is incorrect?

The payback period considers the amount but not the timing of some of a project's cash flows.

The payback rule is biased in favor of short-term projects.

A longer payback period is preferred over a shorter payback period.

The payback period ignores the time value of money.

The payback rule states that you should accept a project if the payback period is less than a stated cut off point.

Reference no: EM131188262

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