Using the Profitability Index, Which of the Following Mutually Exclusive

question 11

Multiple Choice

Using the profitability index, which of the following mutually exclusive projects should be accepted? Project A: NPV = $6,000; NINV = $50,000
Project B: NPV = $10,000; NINV = $120,000
Project C: NPV = $8,000; NINV = $80,000

• A) A
• B) B
• C) C
• D) All projects should be accepted

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Definitions:

Price Level

An index that measures the average of prices for goods and services in an economy over a period of time.

Aggregate Expenditure Line

A graphical representation of the total planned spending in an economy at various levels of national income.

Price Level

A measure that reflects the average prices of goods and services in an economy at a specific point in time.

Marginal Propensity

The tendency of an individual or household to spend an additional dollar of income on consuming goods and services.