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1. A significant flaw in the payback method of capital budgeting is that____________

A. it is calculated using arithmetic average instead of weighted moving average.

B. it assumes future cash flows are reinvested at the IRR.

C. it ignores cash flows following the payback period.

D. it only calculates present values prior to comparing them to investment amount.

2. For the following cash flows, calculate the NPV based on a cost of capital of 12%: Investment of $50,000; Year1: $16,000; Year2: $20,000; Year3: $5,000; Year 4: $29,000

A. -$775.00

B. $3,522.00

C. $2,218.52

D. -$1,281.01

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92414602

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