The present value of an investment's future cash flows divided by its initial cost is the:
A) Net present value.
B) Internal rate of return.
C) Average accounting return.
D) Profitability index.
E) Payback period.

Question

Quizplus · Accepted Answer

The profitability index is calculated by dividing the present value of future cash flows of an investment by its initial cost, making it the correct answer.

The Present Value of an Investment's Future Cash Flows Divided