The proﬁtability index is closely related to:
A)payback.
B)discounted payback.
C)average accounting return.
D)net present value.
E)internal rate of return.

Question

Quizplus · Accepted Answer

The profitability index is calculated by dividing the present value of future cash flows by the initial investment. This is essentially the same calculation as the net present value, which also considers the time value of money by discounted future cash flows to their present value. Therefore, the profitability index is closely related to net present value.

The Proﬁtability Index Is Closely Related To