You Are Considering Two Independent Projects Both of Which Have

question 314

Multiple Choice

You are considering two independent projects both of which have been assigned a discount rate of 9 %. Based on the profitability index, what is your recommendation concerning these projects?

• A) You should accept both projects.
• B) You should reject both projects.
• C) You should accept project A and reject project B.
• D) You should accept project B and reject project A.
• E) You should accept project A and be indifferent to project B.

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Definitions:

Cash

Physical currency owned by a company or individual, including bank notes and coins, often considered the most liquid form of asset.

Stockholders

Individuals or entities that own one or more shares of stock in a corporation, making them partial owners of the company.

Dividend Declaration

The announcement by a company's board of directors of a payment to shareholders, distributed from its earnings.

Retained Earnings

What remains of the company's net earnings after dividend payments to shareholders have been made.