Under Conditions of Limited Resources, When a Company Is Comparing

question 96

Multiple Choice

Under conditions of limited resources, when a company is comparing several investments with different amounts of initial outlay, the decision should be made on the basis of:

• A)highest total cash inflows.
• B)shortest payback period.
• C)highest profitability index.
• D)highest NPV.

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Definitions:

Adverse Selection

A situation in which asymmetric information leads to the selection of undesirable alternatives in transactions.

Pre-Contractually

Refers to activities, negotiations, or conditions that occur before the formal agreement or contract is signed.

Progressive Insurance

An American insurance company known for providing a wide range of insurance products, including auto and homeowners insurance.

Adverse Selection

A situation where asymmetrical information leads to transactions between parties where the high-risk party is more likely to participate than the low-risk party.