Which of the following statements is false?
A) If there is a fixed supply of resource available, you should rank projects by the profitability index, selecting the project with the lowest profitability index first and working your way down the list until the resource is consumed.
B) Practitioners often use the profitability index to identify the optimal combination of projects when there is a fixed supply of resources.
C) If there is a fixed supply of resources available, so that you cannot undertake all possible opportunities, then simply picking the highest NPV opportunity might not lead to the best decision.
D) The profitability index is calculated as the NPV divided by the resources consumed by the project.

Question

Quizplus · Accepted Answer

This statement is false because the correct approach for ranking projects by profitability index is to start with the project with the highest profitability index and work your way down the list until the available resources are consumed. Selecting the project with the lowest profitability index first would result in selecting the least profitable project.

Which of the Following Statements Is False