Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jun 15, 2022

The profitability index is another method to evaluate capital investments. If you are trying to compare investments of different sizes, why is the profitability index

The profitability index is another method to evaluate capital investments. If you are trying to compare investments of different sizes, why is the profitability index a better way to do this when compared to the net present value method?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

Profitability Index measures Profit per invested while NPV measures Tot... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

Step: 3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Practical financial management

Authors: William r. Lasher

5th Edition

0324422636, 978-0324422634

More Books

Students also viewed these Accounting questions

Question

★★★★★

The profitability index is a scale less attribute for measuring a projects benefits relative to the costs. How might this help to eliminate bias in project selection?

Answered: 1 week ago

Question

★★★★★

The profitability index is the present value of the future cash flows divided by the initial investment. If you remember, the NPV function really only calculates the present value of future cash...

Answered: 1 week ago

Question

★★★★★

Suppose that you are trying to compare two populations on some variable (GMAT scores of men versus women, for example). Specifically, you are testing the null hypothesis that the means of the two...

Answered: 1 week ago

Question

★★★★★

Assume a companys estimated sales is 27,000 units. Its desired ending finished goods inventory is 5,000 units, and its beginning finished goods inventory is 3,000 units. What is the required...

Answered: 1 week ago

Question

★★★★★

Refer to the information in QS. Compute the overhead activity rate for each activity, assuming the company uses activity-based costing. In QS Activity Expected Costs $625,000 900,000 105,000 175,000...

Answered: 1 week ago

Question

★★★★★

Suppose that the side angles of the trapezoidal channel in Prob. 10.39 are reduced to 15° to avoid earth slides. If the bottom flat width is 8 ft, (a) Determine the normal depth and (b) Compare...

Answered: 1 week ago

Question

★★★★★

Did regularities emerge from the data such that addition of new information would not change the results?

Answered: 1 week ago

Question

★★★★★

Backflushing. The following conversation occurred between Brian Richardson, plant manager at Glendale Engineering, and Charles Cheng, plant controller. Glendale manufactures automotive component...

Answered: 1 week ago

Question

★★★★★

A firewall can be used to direct and control traffic _ _ _ _ _ . both coming in and going out of your network coming into your network going out of your network only if the traffic comes from a smart...

Answered: 1 week ago

Question

★★★★★

XYZ is a calendar-year corporation that began business on January 1, 2020. For the year, it reported the following information in its current-year audited income statement. Notes with important tax...

Answered: 1 week ago

Question

★★★★★

Donda Corporation has a maximum capacity to produce 30 000 units of serving trays per month. The unit cost is as follows: Direct material cost: $5 Direct Labour cost: $7 Fixed Manufacturing overhead:...

Answered: 1 week ago

Question

★★★★★

Aguila Corporation produces a single product. Variable manufacturing overhead is applied to products on the basis of direct labor-hours. The standard costs for one unit of product are as follows:...

Answered: 1 week ago

Question

★★★★★

Schedule of Cost of Goods Manufactured and Sold At December 31, 2019, the end of its fiscal year, Lederman Manufacturing Corporation collected the following data for 2019: BusinessCourse Return to...

Answered: 1 week ago

Question

★★★★★

Matching: The impact of recycling The impact of city-wide recycling and composting initiatives in major Canadian cities The impact of city-wide composting programs in South Vancouver to 1. Too narrow...

Answered: 1 week ago

Question

★★★★★

Finally, come up with a procedure for assigning a single number "best estimate" and an associated "uncertainty" for each case. By procedure we mean a formula (or else at least an algorithm) which...

Answered: 1 week ago

Question

★★★★★

Problem 9.07 The water tank has a rectangular crack on its side having a width of 100 mm and an average opening of 0.1 mm Laminar flow occurs through the crack. The water is at a temperature of...

Answered: 1 week ago

Question

★★★★★

London purchased a piece of real estate last year for $85,600. The real estate is now worth $101,700. If London needs to have a total return of 0.20 during the year, then what is the dollar amount of...

Answered: 1 week ago

Question

★★★★★

Orange juice producers are dismayed and puzzled. An economist told them that the reason the demand for orange juice fell is that a new technology allow tomato producers to pick ripe tomatoes more...

Answered: 1 week ago

Question

★★★★★

The company president is reviewing the performance and budget of the marketing department with the vice president of marketing. Should that be a one-on-one meeting, or should the CFO be present? Why?...

Answered: 1 week ago

Question

★★★★★

The typical cash flow pattern for business projects involves cash outflows first, and then inflows. However, its possible to imagine a project in which the pattern is reversed. For example, we might...

Answered: 1 week ago

Question

★★★★★

Whole Foods Inc. paid a quarterly dividend of $0.47 recently. Treasury bills are yielding 4%, and the average stock is returning about 11%. Whole Foods is a stable company. The return on its stock...

Answered: 1 week ago

Question

★★★★★

Due to arduous certification requirements, Natures Crunch is currently the only certified organic produce grower in a region that produces lots of nonorganic produce alternatives. From a...

Answered: 1 week ago

Question

★★★★★

Suppose that an inventor discovers a new chemical compound that can change the color of peoples eyes with no negative side effects. Since she holds a patent on this chemical, she has a monopoly over...

Answered: 1 week ago

Question

★★★★★

Suppose that your state is considering a law that would force all monopolies to charge no more than their average total costs of production. Explain to your legislator the pros and cons of this...

Answered: 1 week ago

Previous Question Next Question