The Profitability Index Is the Least Preferable Method to Use

question 83

True/False

The profitability index is the least preferable method to use to evaluate capital budgeting projects because it does not take the time value of money into account.

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Definitions:

Contributory

Involving or denoting a pension, insurance plan, or other benefit scheme where both employers and employees make payments towards the cost.

CPP/QPP

Refers to Canada Pension Plan/Quebec Pension Plan, which are public pension plans in Canada designed to provide income for workers upon retirement.

RRSPs

Registered Retirement Savings Plans, a type of financial account in Canada for holding savings and investment assets to support retirement.

Reduced Pension

A retirement plan that provides beneficiaries with lower benefits than originally anticipated or agreed upon.