1. (TCO 4) Which of the following is true regarding the evaluation of projects?
ID: 2678745 • Letter: 1
Question
1. (TCO 4) Which of the following is true regarding the evaluation of projects? (Points : 4)sunk costs should be included
erosion effects should be considered
financing costs need to be included
opportunity costs are irrelevant
2. (TCO 4) There are several disadvantages to the payback method, among them: (Points : 4)
payback ignores the time value of money.
payback can be used in conjunction with time adjusted methods of evaluation.
payback is easy to use and to understand.
none of the above is a disadvantage.
3. (TCO 3 and 4) A net present value of zero implies that an investment: (Points : 4)
has no initial cost.
has an expected return that is less than the required return.
should be rejected even if the discount rate is lowered.
never pays back its initial cost.
is earning a return that exactly matches the requirement.
Explanation / Answer
1.opportunity costs are irrelevant 2. payback ignores the time value of money. 3. is earning a return that exactly matches the requirement.
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