Capital Rationing

question 24

Multiple Choice

Capital rationing. TuleTime Comics is considering a new show that will generate annual cash flows of $100,000 into the infinite future. If the initial outlay for such a production is $1,500,000 and the appropriate discount rate is 6 per cent for the cash flows, then what is the profitability index for the project?

• A) 0.11
• B) 0.90
• C) 1.11
• D) 1.90

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Definitions:

Wearing Red

Often associated with increased attractiveness, dominance, or power, influenced by cultural or psychological interpretations of the color.

Empirical Support

Evidence that is based on observation or experience, rather than theory or pure logic.

Social Exchange Principles

Theoretical perspectives that view social interactions as transactions in which individuals seek to maximize rewards and minimize costs.

Communal Relationships

Bonds between individuals that are based on mutual care and concern rather than on individual gain.