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 by dividing the present value of the project's future cash flows by the initial investment. A profitability index greater than 1 indicates that the project is expected to generate positive net present value and should be accepted. Option C has the highest profitability index of 1.10, indicating that the project is expected to generate a positive net present value and should be accepted. Therefore, the best choice is C.

You Are Analyzing a Project and Have Gathered the Following