Which of the Following Decision Rules Might Best Be Used

question 34

Multiple Choice

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

• A)profitability index
• B)IRR
• C)equivalent annual annuity
• D)payback period
• E)incremental IRR

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Definitions:

Dividends Paid

Dividends paid are the portion of a company's earnings distributed to its shareholders, typically in the form of cash payments or additional shares.

Dividend Payout Ratio

A financial ratio that shows the percentage of earnings a company pays to its shareholders in the form of dividends.

Internal Growth Rate

The maximum rate at which a company can expand its operations using only internally generated funds, without resorting to external financing.

ROE

Return on Equity is an indicator of a company's profitability, demonstrating the amount of profit generated from the shareholders' investments.