If a project has a net present value of $9,300 (initial outlay $100,000 and present value of net cash flows $109,300), the profitability index for the project would be:

Question

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The profitability index is calculated as the present value of net cash flows divided by the initial outlay. Therefore, the profitability index for this project would be 1.093 ($109,300/$100,000).

If a Project Has a Net Present Value of $9,300