Question

Please add explanation

9. Which of the following statements is accurate?

A) A project that just breaks even on an accounting basis will not pay back.

B) A project that just breaks even on an accounting basis will have a positive rate of return.

C) A project cannot earn a positive return unless its payback period is longer than the project life.

D) If the net income from a project is zero, then the project will have a discounted payback that is equal to its regular payback.

E) The relation between project life and payback period alone cannot tell you whether a project has a positive or negative NPV.

Answer 1

Those products which are breaking even on accounting basis will be having a positive rate of return because accounting rate of return will be considering all such non operating costs also in order to arrive at overall rate of return so these will be better indicator than normal rate of return so if a project has a better accounting rate of return then it should be considered that it will be returning positive rate of return.

Other options are FALSE as they are not stating the correct statements about payback period and accounting rate of return.

Correct answer would be option (B).