Profitability Index Is Useful Under

question 38

Multiple Choice

Profitability index is useful under:

• A) Capital rationing
• B) Mutually exclusive projects
• C) Non-normal projects
• D) None of the above

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Definitions:

Perfect Information

A condition in decision-making where all relevant information is known to the decision-maker, including outcomes, events, and consequences for every choice.

Expected Payoff

The anticipated return or outcome of an investment, decision, or action, considering all possible results weighted by their probabilities.

Expected Opportunity Loss

The anticipated loss in value for choosing an option that is not the best, quantified as the difference between the best expected outcome and the expected outcome of the chosen option.

Expected Monetary Value

The weighted average of all possible outcomes of a decision, where each outcome is weighted by its probability of occurrence.