You Are Considering Two Independent Projects, Both of Which Have

question 116

Multiple Choice

You are considering two independent projects, both of which have been assigned a discount rate of 8 percent. Based on the profitability index, what is your recommendation concerning these
Projects?

• A) You should accept both projects since both of their PIs are positive.
• B) You should accept project A since it has the higher PI.
• C) You should accept both projects since both of their PIs are greater than 1.
• D) You should only accept project B since it has the largest PI and the PI exceeds 1.
• E) Neither project is acceptable.

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Definitions:

Personal Computers

Electronic devices designed for individual use, capable of executing a wide array of tasks such as word processing, accessing the internet, and running software applications.

Sales Growth Rate

A measure of the increase in sales over a specific period, usually expressed as a percentage.

Financial Statements

Structured reports detailing the financial activities and condition of a business, including balance sheet, income statement, and cash flow statement.

Sustainable Growth Rate

The maximum rate at which a company can grow its earnings without needing to increase financial leverage or equity financing.