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1. What does the payback period measure?

  • The time it takes to recoup an investment's cost
  • The total profit generated by an investment
  • The rate of return on an investment
  • The present value of an investment's cash flows

2. The internal rate of return (IRR) is the discount rate that makes the net present value (NPV) of an investment equal to:

  • One
  • Zero
  • The initial investment
  • The salvage value

3. A shorter payback period generally indicates:

  • Higher risk
  • Lower profitability
  • Less liquidity
  • A more attractive investment

4. Which of the following is a limitation of the payback period method?

  • It's easy to calculate
  • It considers the time value of money
  • It ignores cash flows beyond the payback period
  • It's widely used in practice

5. If the IRR of a project is greater than the required rate of return, the project should be:

  • Rejected
  • Accepted
  • Postponed
  • Further investigated

6. The payback period is expressed in terms of:

  • Percentage
  • Dollars
  • Years
  • Units

7. What is a major advantage of using the payback period method?

  • It's very complex
  • It's simple and easy to understand
  • It accurately reflects profitability
  • It considers all cash flows

8. IRR considers the time value of money. Is this statement:

  • False
  • True
  • Sometimes True
  • Cannot be determined

9. A project with a negative NPV will have an IRR that is:

  • Greater than the discount rate
  • Less than the discount rate
  • Equal to the discount rate
  • Cannot be determined

10. Which method is better, Payback period or IRR?

  • Payback Period is always better
  • IRR is always better
  • It depends on the specific context and preferences
  • Neither method is useful

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