One can use the profitability index most usefully for which situation?
A)when capital rationing exists
B)evaluation of exceptionally long-term projects
C)evaluation of non-normal projects
D)when a project has unusually high cash-flow uncertainty

Question

Quizplus · Accepted Answer

The profitability index is a measure of investment profitability that takes into account the time value of money. It is calculated by dividing the present value of the project's expected cash flows by the initial investment. It is most usefully employed in situations where there is capital rationing, which means that there are limited funds available for investment and a need to select the best projects to pursue. By using the profitability index, decision-makers can identify those projects that will provide the highest return on investment relative to their costs.

One Can Use the Profitability Index Most Usefully for Which