Roger\'s Meat Market is considering two independent projects. The profitability

Question

Roger's Meat Market is considering two independent projects. The profitability index decision rule incicates that both projects should be accepted. This result most likely does which one of the following? A. fails to provide useful information as the firm must reject at least one of the projects assumes the firm has sufficient funds to undertake both projects conflicts with the results of the net present value decision rule B. c. bases the accept/reject decision on the same variables as the average accounting return

Explanation / Answer

Ans 1

Option B is the correct answer

If the firm has sufficient funds to undertake both projects

Then it's NPV > 1 and profitability index > 1

profitability index rule determines the acceptability of a project.

If profitability index > 1

It is acceptable. The project is profitable.

If profitability index < 1

It is not acceptable. The project is not profitable.

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