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:

Decreased

Pertains to a reduction in amount, size, intensity, or number.

Time-Series Graph

A graphical representation showing how a given data set changes over time.

Scaling

The process of adjusting the size or volume of an operation to meet changes in demand or to improve efficiency.

Visual Interpretation

The process of examining visual information, such as charts, graphs, or images, to understand and analyze its content.