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

Quizplus · Accepted Answer

Since the projects have initial costs less than $1,000, it is likely that Kristi wants Amy to focus on more simple and straightforward analyses. The payback method is the easiest and most commonly used method for small projects that have a short payback period, which is likely the case for projects with a low initial cost. It is also a good method to start with for someone who is new to business finance.

Kristi Wants to Start Training Her Most Junior Assistant,Amy,in the Art