We Compute the Profitability Index of a Capital Budgeting Proposal

question 12

Multiple Choice

We compute the profitability index of a capital budgeting proposal by

• A) multiplying the internal rate of return by the cost of capital.
• B) dividing the present value of the annual after-tax cash flows by the cost of capital.
• C) dividing the present value of the annual after-tax cash flows by the cash investment in the project.
• D) multiplying the cash inflow by the internal rate of return.

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Definitions:

Eardrops

A type of medication administered directly into the ear canal to treat or prevent ear conditions such as infections and to soften earwax.

2-Year-Old

A toddler at the age of two, a developmental stage characterized by rapid growth in motor skills, speech, and cognitive abilities.

Pinna

The visible part of the ear that resides outside of the head, responsible for collecting sound waves and directing them into the ear canal.

Lanoxin

A brand name for digoxin, a medication used to treat heart failure and certain types of heart rhythm disorders by increasing heart contraction strength and regulating heart rate.