You are analyzing a project and have gathered the following data: Based on the profitability index of _____ for this project,you should _____ the project.
A)0.93; accept
B)1.02; accept
C)1.10; accept
D)0.93; reject
E)1.10; reject

Question

You are analyzing a project and have gathered the following data:  Based on the profitability index of _____ for this project,you should _____ the project.
A)0.93; accept 
B)1.02; accept 
C)1.10; accept 
D)0.93; reject 
E)1.10; reject

Quizplus · Accepted Answer

The profitability index is calculated as the present value of cash inflows divided by the initial investment. A profitability index of 1 or greater indicates that the project is expected to generate positive returns. In this case, the profitability index is given as 1.10, which is greater than 1. Therefore, the project should be accepted. Choice C is the only option that meets this criterion.

You Are Analyzing a Project and Have Gathered the Following