Which of the Following Decision Rules Might Best Be Used

question 42

Multiple Choice

Which of the following decision rules might best be used as a supplement to net present value (NPV) by a firm that favors liquidity?

• A) profitability index
• B) MIRR
• C) equivalent annual annuity
• D) payback period

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Definitions:

Savings

The portion of income not spent on current expenditures or taxes, often set aside for future use or investment.

Excess Capacity

A scenario where a company's production facilities are capable of producing more than is needed to meet the demand.

Market-Based Transfer Prices

Transfer prices set based on market prices for similar goods or services, used in transactions between company divisions.

Suboptimal Decision

A decision that does not achieve the best possible outcome or maximizes the potential value.