________ Is the Recommended Method for Determining the Optimal Capital

question 79

Multiple Choice

________ is the recommended method for determining the optimal capital budget under conditions of capital rationing.

• A) The net present value (NPV) method
• B) Monte Carlo simulation
• C) The modified internal rate of return (MIRR) method
• D) The profitability index (PI) method
• E) The discounted payback method

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Definitions:

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity level.

Net Operating Income

The profit derived from a company's everyday operations, calculated by subtracting operating expenses from gross profit.

Planning Budget

A budget prepared for a specific level of activity; it can be adjusted to reflect various levels of operation.

Labor Rate Variance

A financial measure that compares the actual cost of labor to the expected or standard cost, indicating how well a company manages its labor expenses.