1) If the payback for project A is 2 years and payback for project B is 5 years, which should you choose using the payback method rules only? (ignore NPV, IRR and any cash flows coming in after paycheck)
A) Choose Project A
B) Choose Project B
C) Choose both because capital budgets allow you to spend as much as you want.
D) Choose neither because you always want a payback of 1 year or less.
2) If the Internal Rate of Return (IRR) on a project is 10% and the cost of capital is 12%, which of the following is true? (assume that this is not a brrowing situation and that there is money in the capital budget for this project)
A) you should accept the project
B) You should reject the project
C) IRR is never a valid measure
D) None of the above is true