Which One of the Following Is an Indicator That an Investment

question 46

Multiple Choice

Which one of the following is an indicator that an investment is acceptable?

• A)a modified internal rate of return equal to zero
• B)a profitability index of zero
• C)an internal rate of return that exceeds the required return
• D)a payback period that exceeds the required period
• E)a negative average accounting return

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Definitions:

Sales Increase

The rise in the volume or amount of sales over a specific period, reflecting business growth.

Net Operating Income

The profit generated from a company's core business operations after deducting all operating expenses except for interest and taxes.

Degree Of Operating Leverage

A financial metric that measures the sensitivity of a company's operating income to its sales. Higher leverage indicates that a small change in sales can lead to a large change in operating income.

Contribution Format

A method of income statement presentation that separates variable costs from fixed costs, highlighting the contribution margin.