In the Absence of Capital Rationing, the Net Present Value

question 57

Multiple Choice

In the absence of capital rationing, the net present value method is normally superior to the ____ method when choosing among mutually exclusive investments.
I. internal rate of return
II. profitability index

• A) Only statement I is correct.
• B) Only statement II is correct.
• C) Both statements I and II are correct.
• D) Neither statement I nor II is correct.

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Definitions:

Variable Expenses

Costs that fluctuate with production volume or business activity levels, such as materials and labor.

Fixed Expenses

Costs that do not fluctuate with the level of production or sales, such as rent or salaries.

Annual Sales

The total revenue generated from goods or services sold by a company during a fiscal year.

Advertising Budget

The amount of money allocated by a company to spend on advertising campaigns over a specific period.