Seth Morrison Is Considering Alternative Proposals That Involve Different Amounts

question 27

Multiple Choice

Seth Morrison is considering alternative proposals that involve different amounts of investments. To compare different size investment proposals, it may be helpful for Seth to prepare a relative ranking of the proposals by using a(n) :

• A) present value index.
• B) net present value.
• C) internal rate of return.
• D) none of these answers is correct.

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Definitions:

Capital

Financial assets or resources that businesses or individuals use to fund operations, investments, and growth.

Ordinary Business Income

Income earned from the normal business operations, subject to regular tax rates.

Subchapter S

A section of the Internal Revenue Code that allows corporations to pass income directly to shareholders and avoid double taxation while retaining the benefits of corporate structure.

Schedule K-1

A tax form used to report a beneficiary's share of income, deductions, and credits from a partnership, S corporation, or trust.