Use of a Profitability Index to Select Projects in the Absence

question 79

Multiple Choice

Use of a profitability index to select projects in the absence of capital rationing:

• A)Will provide the same rankings as an NPV criterion
• B)Will maximize NPV, but not IRR
• C)Can result in misguided selections
• D)is technically impossible

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Definitions:

Referent Power

The degree to which a leader can influence others through their desire to identify and be associated with them.

Reward Power

The influence a person has over others based on the ability to grant rewards.

Favoritism

The practice of giving unfair preferential treatment to one person or group at the expense of others.

Legitimate Power

The degree to which a person has the right to ask others to do things that are considered within the scope of their authority.