A present value index can be used to rank competing capital investment proposals when the net present value method is used.

Question

Quizplus · Accepted Answer

A present value index, also known as profitability index, is calculated by dividing the present value of cash inflows by the initial investment. This index provides a measure of the return per dollar of investment and can be used to rank competing capital investment proposals when the net present value method is used. Therefore, the statement is true.

A Present Value Index Can Be Used to Rank Competing