Tests Can Be Used to Facilitate Some Hiring Decisions, but Errors

question 62

Multiple Choice

Tests can be used to facilitate some hiring decisions, but errors will always occur. This is because __________.

• A) a standardized sample can never be found
• B) norms vary from person to person
• C) predictive validity is never 1.00
• D) these tests are subjective

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Definitions:

Profitability Index

An instrument in finance that quantifies the potential profit of an investment by dividing the current value of anticipated cash flows by the initial cost of investment.

Modified Internal Rate Of Return

An adjustment of the Internal Rate of Return formula that rectifies its limitations by incorporating different reinvestment rates for cash flows received over the investment's lifetime.

Payback Period Method

A capital budgeting method that calculates the time required to recoup the cost of an investment, identifying the point where cash inflows equal cash outflows.