Webley Corp

question 108

Multiple Choice

Webley Corp.is considering two expansion options,but does not have enough capital to undertake both,Project W requires an investment of $100,000 and has an NPV of $10,000.Project D requires an investment of $80,000 and has an NPV of $8,200.If Webley use the profitability index to decide,it should:

• A)choose D because it has a higher profitability index.
• B)choose W because it has a higher profitability index.
• C)choose D because it has a lower profitability index.
• D)choose W because it has a higher profitability index

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Definitions:

Purely Competitive Seller

A seller in a market structure characterized by many sellers offering identical products, where no single seller can influence the market price.

Total Fixed Cost

The sum of all costs that remain constant regardless of the level of production or output in the short term.

Variable Cost

Costs that vary in total with changes in the level of production or other business activities.

Market Price

The existing cost for purchasing or selling an asset or service on the open market.