1. Which of the following statements regarding discounted payback (DPB) is/are not true?

Multiple Choice

• It ignores any cash flows that accrue after the project reaches its respective payback benchmark.

• Is a capital budgeting method that generates decision rules and associated metrics that choose projects based on how quickly they return their initial investment plus interest.

• both a and b are not true.

• none of the above.

• Which of the following will increase the operating cycle?

  Multiple Choice

• The cash cycle decreases by one day but the average payment period increases by two and a half days.

• The days' sales in inventory decreases by one day but the average collection period increases by two days.

• COGS stays the same but inventory increases.

• All of these choices are correct.

• Which of the following is NOT a fundamental factor ignored by the target cash balance models?

  Multiple Choice

• Firms have the option to borrow short-term to meet unexpected demands for cash.

• The costs and delays of trading securities have fallen dramatically since the advent of the Internet.

• Many large firms habitually use all or the majority of their available cash to purchase overnight securities.

• Models take into account that many firms must keep compensating balances in their deposit accounts as part of borrowing agreements with their banks.