Which of the Following Best Describes the Profitability Index

question 133

Multiple Choice

Which of the following best describes the profitability index?

• A) an index of projects based on their net income
• B) the ratio of present value of net cash inflows to initial investment
• C) the ratio of total cash inflows to initial investment
• D) an array of possible investment outcomes at different discount rates

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Definitions:

Inferior Good

A type of good for which demand decreases as the income of consumers increases, opposite to normal goods.

Income

Money received on a regular basis from work, property, business, or investments.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price within a specified period.

Alcohol

A chemical compound that is a widely used depressant in beverages; can be intoxicating if consumed in sufficient quantities.