Which Is the Optimal Technique or Rule for Ranking Investment

question 31

Multiple Choice

Which is the optimal technique or rule for ranking investment proposals?

• A) The NPV ranking
• B) The profitability index
• C) The IRR ranking
• D) All rules are flawed where proposals have different lives.

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Definitions:

Spontaneous Financing

Financing that occurs naturally as a company operates, such as trade credit that increases as sales increase.

Working Capital Accounts

Accounts that reflect a company's current assets minus its current liabilities, providing a snapshot of its short-term financial health and operational efficiency.

Borrowing Rate

The interest rate that a lender charges a borrower for the loan of funds, varying based on credit risk, loan amount, and duration.

Net 60

A payment term indicating that payment is due 60 days after the invoice date.