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:

Net Income

The amount of earnings left over after all expenses and taxes have been deducted from total revenue.

Revenue

The total amount of money received by a company for goods sold or services provided during a certain time period.

Break-Even Point

The break-even point is the point at which total costs and total revenues are equal, meaning there is no net loss or gain.

Variable Costs

Costs that vary depending on the level of production or sales.