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No, no, no, this question makes no sense at all. A firm that is short of cash would NEVER consider a project that does not have a very, very quick payback period for the simple reason that they would go bust.
Or, to give a real world example,
"I can't pay the rent tomorrow because I'm short of cash. My options are:
1) Go to night school classes and obtain a business qualification, then get a better job which will make paying the rent easy and leave money for luxuries
2) Sell my car which I can't afford to run anyway.
Hmmm, what to do, what to do ...... "
A firm short of cash might well give greater emphasis to the payback period in evaluating a project.
Answer is True
I agree with Duncan Robertson answers, thanks for the invitation
One of the great limitations on Payback Period in evaluating projects, is that it doesn’t consider the timing of the inflows, i.e. amount of the cash income and does not consider the risk or the present value of money. In my opinion, in any project we should consider other alternatives in the evaluation, like present value, or Internal rate of return. Payback period is not the basic that should be used in projects, but we can use it as an indicator.
Please note also that it is important to estimate your cash budget before starting your project, to maintain the running of the process. lack or shortage of cash will STOP the progress of your project. Thank You .
Depending on the type of project
An estimate payback period
And the usefulness of the project
True. Viable Projects with early payback periods may be given priority in these circumstances.
False.
The firm should either look for earn guarantees fro the banks or switch over to consultancies.
I presume that the right answer is:
True!
I leave the answer experts Specialist in this field .
