The Project Profitability Index and the Internal Rate of Return

question 128

Multiple Choice

The project profitability index and the internal rate of return:

• A) will always result in the same preference ranking for investment projects.
• B) will sometimes result in different preference rankings for investment projects.
• C) are less dependable than the payback method in ranking investment projects.
• D) are less dependable than net present value in ranking investment projects.

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Definitions:

Futures

Legal agreements that compel the purchaser to buy, or the seller to dispose of, an asset at an agreed price and date in the future.

Pounds

The currency unit of the United Kingdom, also known as the British pound sterling, used as a medium of exchange.

Futures Contracts

An agreement to buy or sell a specified quantity of a commodity or financial instrument at a predetermined price at a specified time in the future.

Profit or Loss

The financial result of a company's operations and activities for a specific period, indicating the difference between revenues and expenses.