Kristi wants to start training her most junior assistant, Amy, in the art of project analysis. Amy has just started college and has no experience or background in business finance. To get her started, Kristi is going to assign the responsibility for all projects that have initial costs less than $1,000 to Amy to analyze. Which method is Kristi most apt to ask Amy to use in making her initial decisions?
A) Discounted payback
B) Profitability index
C) Internal rate of return
D) Payback
E) Average accounting return

Question

Kristi wants to start training her most junior assistant, Amy, in the art of project analysis. Amy has just started college and has no experience or background in business finance. To get her started, Kristi is going to assign the responsibility for all projects that have initial costs less than $1,000 to Amy to analyze. Which method is Kristi most apt to ask Amy to use in making her initial decisions?
A) Discounted payback 
B) Profitability index
C) Internal rate of return
D) Payback 
E) Average accounting return

Quizplus · Accepted Answer

Given Amy's lack of experience in business finance, Kristi is likely to assign a method that is simple and straightforward for initial project analysis. The payback method, which calculates the time it takes for an investment to generate an amount of cash equal to the initial investment, is the simplest and requires the least financial knowledge, making it the most suitable choice for Amy.

Kristi Wants to Start Training Her Most Junior Assistant, Amy