A firm seeks to accept projects with a high degree of liquidity, avoid the higher forecasting error associated with cash flows occurring in the distant future, and avoid projects that require a large amount of research and development expenses. This firm may be justified in using the ____________ to evaluate its projects.
A) IRR rule.
B) NPV rule.
C) AAR rule.
D) Payback rule.
E) PI rule.

Question

Quizplus · Accepted Answer

The Payback rule focuses on the time it takes for a project to recoup its initial investment, emphasizing liquidity and the quick recovery of cash. This aligns with the firm's goals of high liquidity and avoiding the uncertainties of long-term forecasts and significant R&D expenses.

A Firm Seeks to Accept Projects with a High Degree