An Investment Is Acceptable If the Profitability Index (PI) of the Investment

question 105

Multiple Choice

An investment is acceptable if the profitability index (PI) of the investment is:

• A)greater than one.
• B)less than one.
• C)greater than the internal rate of return (IRR).
• D)less than the net present value (NPV).
• E)greater than a pre-specified rate of return.

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Definitions:

Forbearance

Forbearance is the action of refraining from enforcing a right, obligation, or debt in a legal agreement, usually as an act of leniency by the creditor.

Sufficient Consideration

A legal concept indicating that the value exchanged in a contract is recognized as adequate, making the contract binding and enforceable.

Illusory Promise

A situation in which a party appears to commit to something but really has not committed to anything. It is not a promise and thus not consideration.

Promissory Estoppel

A legal principle that prohibits a party from withdrawing a promise made to another party if the latter has relied on that promise to their detriment.