Use of a Profitability Index to Evaluate Mutually Exclusive Projects

question 37

Multiple Choice

Use of a profitability index to evaluate mutually exclusive projects in the absence of capital rationing:

• A) will provide the same rankings as an NPV criterion.
• B) will maximize NPV, but not IRR.
• C) can result in misguided selections.
• D) is technically impossible.

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Inefficiently

A descriptor for processes or activities that do not use resources in the best possible way, resulting in wasted effort or energy and not achieving maximum productivity.

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