Entrepreneurial firms with a net worth of less than $1 million tend to prefer the method for evaluating capital expenditures.
A)NPV
B)IRR
C)Payback
D)Profitability index

Question

Quizplus · Accepted Answer

Entrepreneurial firms with a net worth of less than $1 million tend to prefer the payback method for evaluating capital expenditures because it is a simple and straightforward method. Payback method helps entrepreneurs to calculate how long it will take to recover the invested amount, and it is easy to understand for individuals with less financial knowledge. It is also useful when funds are limited, and a quick return on investment is necessary to keep the business running. Other methods like NPV and IRR require more complex financial analysis, and Profitability index is more appropriate for comparing different investment opportunities. Therefore, Payback method is the best choice for entrepreneurial firms with a limited net worth.

Entrepreneurial Firms with a Net Worth of Less Than $1