A Firm Plans to Use the Profitability Index to Select

question 3

Multiple Choice

A firm plans to use the profitability index to select between two mutually exclusive investments.If no capital rationing has been imposed,which project should be selected?

• A) Select the project with the higher profitability index
• B) Select the project with the lower profitability index
• C) Without capital rationing, both projects can be selected
• D) Without capital rationing, the NPV method must be used instead

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Definitions:

Article 3

A section of the U.S. Constitution that establishes the judicial branch of the federal government, outlining the powers and structure of the Supreme Court and other federal courts.

Negotiable Instruments

Financial instruments, such as checks, promissory notes, and bills of exchange, that contain an unconditional promise or order to pay a specified amount of money and are transferable by endorsement.

UCC

All commercial exchanges in the United States are regulated by the comprehensive legal framework known as the Uniform Commercial Code.

Third Party

An entity that is not directly involved in a legal transaction or agreement but may be affected by it or have an interest in it.