Trovato Corporation is considering a project that would require an investment of $48,000. No other cash outflows would be involved. The present value of the cash inflows would be $51,840. The profitability index of the project is closest to (Ignore income taxes.):

Question

Quizplus · Accepted Answer

The profitability index is calculated by dividing the present value of future cash inflows by the initial investment. Here, it is $51,840 / $48,000 = 1.08.

Trovato Corporation Is Considering a Project That Would Require an Investment