The Profitability Index (PI) Approach ____

question 3

Multiple Choice

The profitability index (PI) approach ____.

• A) fails to directly consider the timing of a project's cash flows
• B) considers only a project's contributions to net income and does not consider cash flow effects
• C) always gives the same accept-reject decisions for independent projects as does NPV and IRR
• D) always gives the same accept-reject decisions for mutually exclusive projects as does NPV and IRR

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Definitions:

Producer Decisions

The selections made by firms regarding the production of goods or services, including what, how, and for whom to produce.

Consumer Demands

The desire, willingness, and ability of consumers to purchase goods and services at various price levels.

Market System

A market mechanism where the allocation of resources for investment, production, and distribution is driven by the forces of supply and demand, with the pricing of goods and services set freely within the market.

Minimize Cost

The process of finding the most efficient level of production, where the combination of inputs results in the lowest possible cost.