RicChallengingson Corporation has the following information available regarding one of the projects it is considering: The profitability index of this project is:

Question

RicChallengingson Corporation has the following information available regarding one of the projects it is considering:  The profitability index of this project is:

Quizplus · Accepted Answer

The profitability index is calculated by dividing the present value of future cash inflows by the initial investment. 
Using the given information, 
PV of future cash inflows = $225,000 
Initial investment = $200,000 
Profitability Index = PV of future cash inflows / Initial investment = $225,000 / $200,000 = 1.125 
Therefore, the best choice is B.

RicChallengingson Corporation Has the Following Information Available Regarding One of the Projects