You are opening up a brand new retail strip mall.You presently have more potential retail outlets wanting to locate in your mall than you have space available.What is the most appropriate tool to use if you are trying to determine the optimal allocation of your retail space?

Question

Quizplus · Accepted Answer

The profitability index is the ratio of the present value of a project's expected cash flows to the initial investment. It helps to determine the most profitable investment opportunity by comparing the profitability of different projects with different initial investments. In this case, since there are more potential retail outlets than available space, using the profitability index can help to evaluate which retail outlets will be the most profitable and therefore should be allocated the limited space. The higher the profitability index, the better the investment opportunity. Therefore, the outlets with the highest profitability index should be given priority in the allocation of space.

You Are Opening Up a Brand New Retail Strip Mall