When Hard Capital Rationing Exists, Projects May Be Accurately Evaluated

question 38

Multiple Choice

When hard capital rationing exists, projects may be accurately evaluated by use of:

• A)Payback period
• B)Mutually exclusive IRRs
• C)A profitability index
• D)Borrowing, rather than lending, projects

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Definitions:

Indirect Expense

Costs that are not directly traceable to a specific product, service, or department, but are necessary for the business to operate.

Total Direct Cost

The sum of all direct costs associated with the production of goods or the provision of services, including direct materials and direct labor.

Departments

Departments refer to distinct segments within an organization, each with specific responsibilities and roles, meant to streamline operations and improve efficiency.

Expenses

Costs incurred by a business in the process of earning revenue.