Peterson Inc.has the following information available regarding one of the projects it is considering:
$\begin{array}{lr}
\text { Initial investment} &\$75000\
\text { PV of cash inflows } &\$100000\
\text { Internal rate of return } &15\%\
\end{array}$

The profitability index of this project is:

Question

Peterson Inc.has the following information available regarding one of the projects it is considering:
$\begin{array}{lr}
  \text {  Initial investment} &\$75000\
 \text { PV of cash inflows } &\$100000\
 \text { Internal rate of return } &15\%\
\end{array}$

The profitability index of this project is:

Quizplus · Accepted Answer

A profitability index greater than 1 indicates that the project is expected to generate more cash inflows than the initial investment. In this case, the profitability index is 1.33, which means that the project is expected to generate 33% more cash inflows than the initial investment. Therefore, Peterson Inc. should choose this project.

Peterson Inc The Profitability Index of This Project Is: A) 1

Peterson Inc The Profitability Index of This Project Is:
A) 1