In: Economics
Using the incremental B/C method for comparing mutually exclusive alternatives always results in the same economically preferred alternatives as using the PW method.
True/False
When selecting projects based on the payback period method, a project with a shorter payback period is generally preferred.
True/False
One of the shortcomings of using the discounted payback period to select alternatives is that
a)it ignores all the cash flows beyond the payback period
b)it gives more weight to the cash flows beyond the payback period
c)it does not take into account the interest rate
A project with a higher net PW than a competing project of the same service life will also always have a higher B/C ratio.
True/False
When comparing mutually exclusive alternatives with the same service lives, the alternative with the highest B/C ratio is always the most economical.
True/False
Given the following information for a project: initial capital cost = $240,000; annual revenues = $60,000 and annual costs = $20,000; its simple payback period is most nearly equal to
6years
12years
4years
3years