An investment is acceptable if the profitability index (PI)of the investment is
A)greater than one.
B)less than one.
C)greater than the internal rate of return (IRR).
D)less than the net present value (NPV).
E)greater than a prespecified rate of return.

Question

Quizplus · Accepted Answer

The profitability index (PI) is a measure used to evaluate the attractiveness of an investment. If the PI is greater than one, it means that the present value of future cash flows is greater than the initial investment, indicating that the investment is expected to generate more value than it costs, thus making it acceptable.

An Investment Is Acceptable If the Profitability Index (PI)of the Investment