A Division Manager Is Considering a Project That Requires a Significant

question 64

Multiple Choice

A division manager is considering a project that requires a significant initial investment.If accepted,the project could have a negative impact on certain financial ratios that the firm is required to maintain to satisfy bond contracts.The manager wants to ensure that the ratios will NOT be adversely affected by the investment.Which capital investment model should the manager use?

• A)the payback period
• B)the accounting rate of return
• C)the net present value
• D)the internal rate of return

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Definitions:

CEO

Chief Executive Officer, the highest-ranking person in a company or organization, responsible for making major corporate decisions.

Rational Choice

is a theoretical framework that assumes individuals make decisions by considering the potential costs and benefits of different options to maximize their advantage.

Decision Making

The process of selecting the best course of action from several alternatives to achieve a specific goal.

Product-Development Activities

The series of tasks involved in designing, creating, and bringing a new product to market.