Based on the Profitability Index (PI)rule,should a Project with the Following

question 13

Multiple Choice

Based on the profitability index (PI) rule,should a project with the following cash flows be accepted if the discount rate is 8%? Why or why not?

• A)yes;because the PI is 1.008.
• B)yes;because the PI is .992.
• C)yes;because the PI is .999.
• D)no;because the PI is 1.008.
• E)no;because the PI is .992.

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Definitions:

Accounting Entity

A clearly defined economic unit that isolates the financial activities of a specific business from those of its owners and other businesses.

Articles of Co-partnership

A legal document that specifies the rights, responsibilities, and obligations of partners in a partnership business.

Oral Agreements

Contracts or agreements that are made through spoken communication rather than in writing, though their legal enforceability can vary.

Arbitration

A form of dispute resolution where an impartial third party, the arbitrator, makes a decision to resolve a dispute outside of court.