Analysis Using the Profitability Index

question 26

Multiple Choice

Analysis using the profitability index:

• A) frequently conflicts with the accept and reject decisions generated by the application of the net present value rule.
• B) is useful as a decision tool when investment funds are limited.
• C) cannot be used to aid capital rationing.
• D) utilizes the same basic variables as those used in the average accounting return.
• E) produces results which typically are difficult to comprehend or apply.