The Project Profitability Index and the Internal Rate of Return

question 128

Multiple Choice

The project profitability index and the internal rate of return:

• A) will always result in the same preference ranking for investment projects.
• B) will sometimes result in different preference rankings for investment projects.
• C) are less dependable than the payback method in ranking investment projects.
• D) are less dependable than net present value in ranking investment projects.

---

Definitions:

Equity Method

An accounting procedure used for recording investments in associated companies where the investor has significant influence but not control.

Significant Influence

The capability to engage in the decision-making processes regarding the financial and operational policies of an investee, but without exercising control or shared control over such policies.

Equity in Income

Earnings attributed to a company's investment in other companies, reflecting the share of profits from the investments.

Net Income

The final profit amount for a company, which comes after deducting all expenditures and taxes from the gross revenue.