Consider the following possible problems that arise in using alternative capital budgeting decision rules.

Then, in the next TWO questions, choose the problems associated with the technique.

I. IGNORES TIME VALUE OF MONEY

II$.$ IGNORES THE MORE DISTANT CASH FLOWS

III. MAY NOT CORRECTLY DISTINGUISH AMONG MUTUALLY EXCLUSIVE

PROJECTS

IV$.$ MAY GIVE MULTIPLE RESULTS IS SOME FUTURE CASH FLOWS ARE NEGATIVE

$1.$ What are the problems associated with the payback period $($the plain payback, not discounted

payback$)?$

a$.$ I only

b$.$ II only

c$.$ III and IV only

d$.$ I, II$,$ and III only

e$.$ I, II$,$ III and IV

$2.$ What are the problems associated with the NPV$?$

a$.$ I only

b$.$ II only

c$.$ III and IV only

d$.$ I, II$,$ and III only

e$.$ None of these apply to NPV