The profitability index would be ____ if the present value of the net cash flows (NCF) over the life of a project were ____.
A) negative; less than zero
B) negative; less than the net investment
C) zero; equal to the net investment
D) None of these are correct

Question

Quizplus · Accepted Answer

The profitability index would be negative if the present value of the net cash flows over the life of a project were less than zero. This is because the profitability index is calculated by dividing the present value of the net cash flows by the initial investment. If the present value of the net cash flows is less than zero, then the profitability index will be less than one, which indicates that the project is not profitable.

The Profitability Index Would Be ____ If the Present Value