QUESTION 3 Project A B Year 0 Year 1 Year 2 Year 3 -$200 -$300 $100 $175 $100 $100 $125 $125 Based on the payback rule, which of the following is false? O With a payback cutoff of 1.5 years, both projects are unacceptable. You would be indifferent between the two projects. With a payback cutoff of three years, both projects are acceptable. With a payback cutoff of one year, neither project is acceptable. O Since both projects pay back, the NPV of both must be positive.
QUESTION 3 Project A B Year 0 Year 1 Year 2 Year 3 -$200 -$300 $100 $175 $100 $100 $125 $125 Based on the payback rule, which of the following is false? O With a payback cutoff of 1.5 years, both projects are unacceptable. You would be indifferent between the two projects. With a payback cutoff of three years, both projects are acceptable. With a payback cutoff of one year, neither project is acceptable. O Since both projects pay back, the NPV of both must be positive.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:QUESTION 3
Project
Year 0
Year 1
Year 2
Year 3
A
-$200
$100
$100
$100
B
-$300
$175
$125
$125
Based on the payback rule, which of the following is false?
With a payback cutoff of 1.5 years, both projects are unacceptable.
You would be indifferent between the two projects.
With a payback cutoff of three years, both projects are acceptable.
With a payback cutoff of one year, neither project is acceptable.
Since both projects pay back, the NPV of both must be positive.
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