Charles Inc.has the following information available regarding one of the projects it is considering:
$\begin{array}{lr}
\text { Initial investment} &\$50000\
\text {PV of cash inflows } &55000\
\end{array}$

The profitability index of this project is:

Question

Charles Inc.has the following information available regarding one of the projects it is considering:
$\begin{array}{lr}
  \text {  Initial investment} &\$50000\
 \text {PV of cash inflows  } &55000\
\end{array}$

The profitability index of this project is:

Quizplus · Accepted Answer

The profitability index is calculated by dividing the present value (PV) of cash inflows by the initial investment. Here, it is $55000 / 50000 = 1.10$.

Charles Inc Initial investment$50000PV of cash inflows 55000\begin{array}{lr} \text { Initial investment} &\$50000\\ \text {PV of cash inflows } &55000\\\end{array} Initial investmentPV of cash inflows ​$5000055000​

Charles Inc $\begin{array}{lr} \text { Initial investment} &\$50000\\ \text {PV of cash inflows } &55000\\\end{array}$