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CIPS Defining Business Needs L4M2 Question # 73 Topic 8 Discussion

CIPS Defining Business Needs L4M2 Question # 73 Topic 8 Discussion

L4M2 Exam Topic 8 Question 73 Discussion:
Question #: 73
Topic #: 8

A company is evaluating two investment projects: Project A and Project B. Project A has a high initial cost but generates substantial cash flows over time. Project B has a lower initial cost but generates modest cash flows consistently. The company's cost model indicates a payback period of three years for Project A and a payback of four years for Project B. Which of the following statements is correct regarding the cost models and cash flow profiling for these projects?


A.

Project A has a shorter payback period, making it a quicker return on investment compared to Project B


B.

Project A’s higher initial cost is a disadvantage, and its payback period should be extended for better profitability


C.

Project B’s lower initial cost allows for faster profit realisation, making it the better investment choice


D.

Project B’s modest and consistent cash flows make it a risky investment option due to a longer payback period


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