The profitability index is closely related to:
A)payback.
B)discounted payback.
C)net present value.
D)average accounting return.
E)internal rate of return.

Question

Quizplus · Accepted Answer

The profitability index is a ratio of the present value of future cash flows to the initial investment. It helps in determining the attractiveness of an investment project. Net present value (NPV) is also based on discounted cash flows and involves subtracting the initial investment from the present value of the cash inflows. Therefore, the profitability index is closely related to NPV.

The Profitability Index Is Closely Related To