If a Proposal's Profitability Index Is Greater Than One

question 49

Multiple Choice

If a proposal's profitability index is greater than one:

• A) the net present value is negative.
• B) the net present value is positive.
• C) the net present value is zero.
• D) none of these, because the net present value cannot be gauged by the profitability index.
• E) the proposal should be rejected.

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Definitions:

Revenue Increase

The rise in the total income generated from the sale of goods or services.

Price Effect

The impact on the quantity demanded of a good or service due to a change in its price.

Quantity Effect

The change in the total amount consumed or produced of a good or service resulting from a change in its market price.

Entrance Fee

A charge for admission, often paid at the entrance of a facility, event, or establishment.