Capital Rationing

question 11

Multiple Choice

Capital rationing. You are considering a project that has an initial cost of $1,200,000. If you take the project, it will produce net cash flows of $300,000 per year for the next six years. If the appropriate discount rate for the project is 10 per cent, what is the profitability index of the project?

• A) 0.09
• B) 1.09
• C) 2.09
• D) 2.18

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Definitions:

Uniform Computer Information Transactions Act

A proposed set of laws aimed at harmonizing the legal treatment of transactions in computer information and digital products.

Perfect Tender Rules

Legal standards within the Uniform Commercial Code (UCC) that require sellers to deliver goods to buyers exactly as agreed in their contract.

Software Vendors

Companies or individuals that develop, license, and sell software products or services.

Course of Performance

An interpretation of contract terms based on how parties have acted or performed under the contract in the past.