Question

Which one of the following indicates that a project should be rejected? Assume the cash flows are normal, i.e., the initial cash flow is negative.

Group of answer choices
a)Average accounting return that exceeds the requirement Internal rate of return lower than the required return
b)Positive net present value
c)Payback period that is shorter than the requirement period

Answer 1

The correct answer is c) Payback period that is shorter than the requirement period.

Step-by-step explanation:

The correct answer is c) Payback period that is shorter than the requirement period. The payback period is the time it takes for a project to recoup its initial investment. In general, a shorter payback period is preferred because it indicates that the project will generate positive cash flows earlier. A payback period that is shorter than the required period means that the project is able to recover its initial investment too quickly, which may indicate that it is too risky or not profitable enough.