The Profitability Index

question 32

Multiple Choice

The profitability index:

• A)rule often results in decisions that conflict with the decisions based on the net present value rule.
• B)is useful as a decision tool when investment funds are limited and all available funds are allocated.
• C)method is most commonly used when deciding between mutually exclusive projects of varying size.
• D)rule states that the project with the lower index value should be accepted.
• E)produces results which typically are difficult to comprehend.

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Definitions:

Attributes

Characteristics or qualities that are inherent in or ascribed to someone or something, defining aspects of their identity or nature.

Fundamental Attribution Error

The tendency to attribute behaviors to a person’s internal qualities while underestimating situational influences.

Unemployed

The state of being without a paid job but available to work.

Illusory Correlation

A cognitive bias where a relationship is perceived between two variables even when no such relationship exists.