If a Project's Profitability Index Is Less Than 1, Then

question 144

Multiple Choice

If a project's profitability index is less than 1, then

• A) its net present value is zero.
• B) its net present value is positive.
• C) it should be rejected.
• D) its internal rate of return is greater than the discount rate.

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Definitions:

Equity Method Investment

A method of accounting for investments in which the investor has significant influence over the investee, but not full control, typically between 20% and 50% ownership.

Outstanding Shares

The total number of shares of a corporation's stock that have been issued and are currently owned by shareholders, including those held by institutional investors and restricted shares.

Journal Entries

Journal entries are the initial records of financial transactions in the accounting process, indicating the debit and credit impact on specific accounts.

Creditor Relationship

The financial and business dynamics between a creditor, who extends credit, and a debtor, who owes the creditor money.