A Firm Uses the Profitability Index to Select Between Two

question 89

Multiple Choice

A firm uses the profitability index to select between two mutually exclusive investments.If no capital rationing has been imposed,which project should be selected?

• A) Select the project with the higher profitability index.
• B) Select the project with the lower profitability index.
• C) Without capital rationing, both projects can be selected.
• D)Without capital rationing, select by NPV method.

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Definitions:

Supply

The total amount of a specific good or service that is available to consumers at a particular price level.

Demand

The amount of a product or service that buyers are prepared and capable of buying at different price levels over a specified time frame.

Consumption

The use of goods and services by households or individuals, which is a primary component of economic activity.

Income

The financial money received, especially on a regular basis, for work, through investments, or from business activities.