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

question 42

Multiple Choice

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

• A) project should always be accepted.
• B) project's net present value is negative.
• C) project's internal rate of return is less than the discount rate.
• D) project should be accepted if funds are available.

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Definitions:

Economic Order Quantity

A calculation used to determine the most efficient order size that minimizes the sum of ordering and holding costs associated with inventory management.

Holding Costs

Expenses associated with storing inventory, including warehouse storage fees, insurance, and spoilage costs, until the inventory is sold or used.

Purchase Price

The amount of money required to acquire a good or service.

Stock-Out Costs

The expenses incurred by a business when it runs out of stock on a particular item, including lost sales, customer dissatisfaction, and potential reduction in market share.