1. The disadvantages of the simple payback approach include:
cash flows after the payback period are ignored in the calculation
payback ignores the time value of money
payback fails to provide an objective decision-making criterion
all of the above
2. A project requires a net investment of $500,000. It has a profitability index of 1.5 based on the firm's 12 percent cost of capital. Determine the net present value of the project.
$ 250,000
$ 562,500
$1,012,500
$ 140,625