Which of the following decision rules is best for evaluating projects for which cash ﬂows beyond a speciﬁed point in time, and the time value of money, can both be ignored?
A) Payback.
B) Net present value.
C) Average accounting return.
D) Proﬁtability index.
E) Internal rate of return.

Question

Quizplus · Accepted Answer

Payback is the best choice in this scenario as it only considers the time it takes for the project to recoup its initial investment, regardless of cash flows beyond a specific point and the time value of money. A shorter payback period indicates a more desirable project as it returns the initial investment faster. Other decision rules, such as net present value and internal rate of return, take into account the time value of money and cash flows over the entire life of the project, which would not be relevant in this scenario.

Which of the Following Decision Rules Is Best for Evaluating