Which One of the Following Is True If the Managers

question 61

Multiple Choice

Which one of the following is true if the managers of a firm only accept 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:

Average Collection Period

The typical duration a business must wait to collect payments from its customers for goods or services sold on a credit basis.

Financial Data

Refers to information related to the financial performance of an entity, including income, expenses, assets, and liabilities.

Sales On Account

Transactions where goods or services are sold and payment is deferred to a future date, essentially selling on credit.

Cost Of Goods Sold

The costs directly connected with generating the goods a firm sells to its customers.