1. When making capital-budgeting decisions, for a project to be ACCEPTED its NET PRESENT VALUE must be

A. Equal to or greater than the cost of the initial investment

		B. Equal to or greater than the projects Internal Rate of Return (IRR)
	C.	Equal to or greater than the projects payback period
	D.	Equal to or greater than 0

2. The payback method has two weaknesses. Identify BOTH WEAKNESSES below. You must correctly identify BOTH weaknesses for any credit on this question.

	The payback method presumes a discount rate
		The payback method discounts future cash flows
		The payback method does not discount future cash flows
		The payback method ignores all cash flows after payback is reached
		The payback method ignores all cash flows before payback is reached.

3. What is the proper decision rule (or cutoff) for the payback method?

		A. If calculated payback is less than the useful life buy the machine.
		B. If calculated payback is more than the useful life buy the machine.
	C.	If calculated payback is greater than zero buy the machine.
	D.	If calculated payback is less than some corporate standard buy the machine.