If the profitability index for a project exceeds 1,then the project's
A)net present value is positive.
B)internal rate of return is less than the project's discount rate.
C)payback period is less than 5 years.
D)accounting rate of return is greater than the project's internal rate of return.

Question

Quizplus · Accepted Answer

The profitability index (PI) is calculated by dividing the present value of future cash flows by the initial investment. If the PI exceeds 1, it means that the present value of future cash flows is greater than the initial investment, indicating a positive net present value (NPV) for the project. Therefore, option A is the correct answer. The other options are not necessarily true and do not necessarily relate to the PI.

If the Profitability Index for a Project Exceeds 1,then the Project's