A company is pondering an investment project that has an internal rate of return which is equal to the company's discount rate. The profitability index of this investment project is:

Question

Quizplus · Accepted Answer

The profitability index is calculated as the present value of future cash flows divided by the initial investment. When the internal rate of return (IRR) equals the discount rate, the present value of future cash flows equals the initial investment, making the profitability index equal to 1.0.

A Company Is Pondering an Investment Project That Has an Internal