ECONOMICS
CREDIT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the longer the payback time the higher dollar cost of the interest
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the longer the payback time the lower dollar cost of the interest
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variable interst rates benefit the borrower during inflation
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the useful life of a credit purchase must always exceed the length of repayment time
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Detailed explanation-1: -For a conventional project, payback period is always lower than discounted payback period. It’s because the calculation of the discounted payback period takes into account the present value of future cash inflows. So, based on this criterion, it’s going to take longer before the original investment is recovered.
Detailed explanation-2: -Answer and Explanation: The correct answer is c. The payback method provides the years needed to recoup the investment in a project.
Detailed explanation-3: -Answer and Explanation: Correct Answer: Option A. The payback method does not consider the time value of money.
Detailed explanation-4: -Cash flow after taxes are used to compute the payback period. Depreciation is not considered for calculating cash flows (i.e. depreciation will not be deducted)