The profitability index (PI)is calculated as:

Question

Quizplus · Accepted Answer

The profitability index (PI) is calculated by dividing the net present value (NPV) by the initial investment. This gives a measure of the value created by the project for each dollar invested. A PI of greater than one indicates that the project is profitable, while a PI of less than one indicates that the project is not profitable. Therefore, option B is the best choice as it correctly describes the calculation of PI.

The Profitability Index (PI)is Calculated As