The profitability index would be if the present value of the net cash flows (NCF) over the life of a project were ____.
A)negative;less than zero
B)negative;less than the net investment
C)zero;equal to the net investment
D)none of these

Question

Quizplus · Accepted Answer

The profitability index is a measure of the profitability of a project. It is calculated by dividing the present value of the net cash flows over the life of the project by the net investment. If the present value of the net cash flows is less than the net investment, then the profitability index will be less than zero, which indicates that the project is not profitable.

The Profitability Index Would Be If the Present Value of the Net