The PI method is preferred to the NPV criterion whenever:

Name: The PI method is preferred to the NPV criterion whenever:
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The PI (Profitability Index) method is preferred over the NPV (Net Present Value) criterion when capital is scarce and attractive investment projects are relatively abundant. This is because PI, which is calculated as the present value of future cash flows divided by the initial investment, helps in ranking projects in terms of their efficiency in utilizing the limited capital.

The PI Method Is Preferred to the NPV Criterion Whenever