You Are Considering Two Independent Projects, Both of Which Have

question 27

Multiple Choice

You are considering two independent projects, both of which have been assigned a discount rate of 8 %. Based on the profitability index, what is your recommendation concerning these projects?

• A) You should accept both projects since both of their PIs are positive.
• B) You should accept project A since it has the higher PI.
• C) You should accept both projects since both of their PIs are greater than 1.
• D) You should only accept project B since it has the largest PI and the PI exceeds 1.
• E) Neither project is acceptable.

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Definitions:

Pulmonary Fibrosis

A lung disease that occurs when lung tissue becomes damaged and scarred, which can severely hamper respiratory function.

Silica

A tough, inert, and colorless substance found as quartz in nature and as a major component of sandstone and various other stones.

Coal Dust

Fine particulate byproduct of coal processing that can pose health risks when inhaled.

Antibiotics

Medications used to prevent and treat bacterial infections by either killing the bacteria or inhibiting their growth.