You Are Considering Two Independent Projects Both of Which Have

question 46

Multiple Choice

You are considering two independent projects both of which have been assigned a discount rate of 8%. 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. Because the projects are independent and their PIs exceed 1.0, both projects should be accepted.

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Definitions:

Supply and Demand

Economic model that determines the price of a commodity in a market, based on the availability of the commodity (supply) and the desire for it (demand).

Francs

A former currency unit used in France and several other countries before the adoption of the euro, also still used in some parts of Switzerland and Liechtenstein.

Exchange Rate

The exchange rate is the price at which one currency can be exchanged for another, affecting imports, exports, and international investments.

Exchange Rate

The value of one currency for the purpose of conversion to another, determining how much of one currency can be exchanged for another.