Question Title * 1. True or false? The profitability index is the ratio of sum of simple cash flows to the absolute value of the cost of the project. True False, it is the ratio of sum of discounted cash flows. Question Title * 2. Which one of the following is not a problem associated with using discounted payback threshold as a decision rule? It does not attempt to maximize shareholder wealth The threshold value is arbitrary It does not consider how much is paid after the payback point It ignores the time value of money Question Title * 3. Which one of the following is not a benefit of using profitability index as a decision rule? Can be used to rank mutually exclusive projects Includes all cash flows Includes risk appropriate discount rate Gives the same decision as NPV would Done
