The present value of an investment's future cash ﬂows divided by the initial cost of the investment is called 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 present value of an investment's future cash ﬂows divided by the initial cost of the investment is called the profitability index. This measure takes into account the time value of money and provides information about the value created by an investment relative to its cost. Therefore, option D is the most appropriate choice.

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