Which of the Following Statements Is FALSE

question 9

Multiple Choice

Which of the following statements is FALSE?

• A) If there is a fixed supply of resource available, you should rank projects by the profitability index, selecting the project with the lowest profitability index first and working your way down the list until the resource is consumed.
• B) Practitioners often use the profitability index to identify the optimal combination of projects when there is a fixed supply of resources.
• C) If there is a fixed supply of resources available, so that you cannot undertake all possible opportunities, then simply picking the highest NPV opportunity might not lead to the best decision.
• D) The profitability index is calculated as the NPV divided by the resources consumed by the project.

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Definitions:

Contributed Services

Services provided by volunteers or donated resources that are typically not paid for but are recorded in the financial statements if they create or enhance a nonfinancial asset or require specialized skills.

Permanent Endowment

A donation of money or property to a nonprofit organization, which uses the resulting investment income for a specific purpose.