Which One of the Following Is True If the Managers

question 103

Multiple Choice

Which one of the following is true if the managers of a firm accept only projects that have a profitability index greater than 1.5?

• A)The firm should increase in value each time the firm accepts a new project.
• B)The firm is most likely steadily losing value.
• C)The price of the firm's stock should remain constant.
• D)The net present value of each new project is zero.
• E)The internal rate of return on each new project is zero.

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Definitions:

Expansionary Monetary

Refers to a policy aimed at increasing the money supply in order to stimulate economic activity, typically adopted by a central bank to foster economic growth.

Natural Rate

The natural rate often refers to the natural rate of unemployment, which is the level of unemployment consistent with sustainable economic growth, not accelerated by inflation.

Unexpectedly High

A level or measure that exceeds what was anticipated or forecasted.