#7 The decision criteria for the Payback is to reject a project if the Payback i

Question

#7

The decision criteria for the Payback is to reject a project if the Payback is

less than a rule of thumb in a particular company.

equal to a rule of thumb in a particular company.

greater than a rule of thumb in a particular company.

negative.

equal to zero.

positive.

less than one.

equal to one.

greater than one.

less than the required rate of return.

equal to the required rate of return.

greater than the required rate of return.

1.

less than a rule of thumb in a particular company.

2.

equal to a rule of thumb in a particular company.

3.

greater than a rule of thumb in a particular company.

4.

negative.

5.

equal to zero.

6.

positive.

7.

less than one.

8.

equal to one.

9.

greater than one.

10.

less than the required rate of return.

11.

equal to the required rate of return.

12.

greater than the required rate of return.

Explanation / Answer

Less than a rule of thumb in a particular company is the correct option.

Pay pack period is the period of time to recover the initial investment. It is a measure of liquidity and provides a value that tells how many years it will take to repay the initial investment to the organization.

For a single project, Payback period should be lower than the standard set by the organization to accept it. For mutually exclusive set of projects, a project with the lowest payback period should be accepted.

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