Answer question 15 and 16 Answer question 15 and 16 5. The severe drawback of us
ID: 2804912 • Letter: A
Question
Answer question 15 and 16 Answer question 15 and 16 5. The severe drawback of using payback period is that it ignores the time value of money. A) TRUE B) FALSE 6. Assume that you had bought a convertible bond with a conversion ratio of 30 (Face value $1,000). Now the stock of this firm is selling for $30. Will you execute this option of version? If so, what is the profit do you get when you convert the bond into stocks and con sell it in the stock market? A) Not executed B) Executed, and the profit is 100 C) Cannot determine due to the lack of conditions D) Executed, and the profit is 30Explanation / Answer
15)
Dollar received today is more valueble than the dollar received tomorrow. Future dollars must be adjusted for time difference with appropriate rate. Simple payback does not consider time value of money.
Hence, given statement is True.