Under Capital Rationing the Profitability Index Is Used to Select

question 25

Multiple Choice

Under capital rationing the profitability index is used to select investments because of limited capital by their:

• A) excess profit to achieve the highest payoff.
• B) reward per dollar cost to achieve the highest incremental NPV.
• C) incremental IRR to maximize the total rate of return.
• D) capital usage rate to stay within budget.

---

Definitions:

Integration

The process of combining different systems, applications, or processes to function cohesively, allowing for more efficient operation and communication.

Outsourcing

Use of outside contractors or external organizations to acquire IT services.

Insourcing

Insourcing is the practice of performing a business function internally rather than outsourcing it to an external provider.

Onshoring

The practice of transferring a business operation that was moved overseas back to the country from which it was originally relocated.