We are asked that: (a) Although it is conceptually unsound, the payback period is very popular in business asa criterion for assigning priorities to investment projects. Why is it unsound, and why is it popular?

(B) What are mutually exclusive investment projects? What is a dependent project?

(C) Is the economic efficiency of a country enhanced by the use of modern capital budgeting

techniques? Why?

(D)If capital rationing is not optimal, why would any company use it?

(E)The internal rate of return method implies that intermediate cash flows are reinvested at the internal rate of return. Under what circumstances is this assumption likely to lead to a seriously biased measure of the economic return from the project?