Which of the following investment decision rules tends to improperly reject long-lived projects?
A)net present value
B)internal rate of return
C)payback period
D)profitability index

Question

Quizplus · Accepted Answer

The payback period rule tends to improperly reject long-lived projects because it only considers the time it takes to recover the initial investment and ignores any cash flows beyond the payback period. This can lead to the rejection of projects with positive net present values or profitability indexes. The other investment decision rules (net present value, internal rate of return, and profitability index) take into account all cash flows over the entire life of the project and thus are less likely to improperly reject long-lived projects.

Which of the Following Investment Decision Rules Tends to Improperly