When the profitability index is greater than 1.00 for a project,that project has a positive net present value.

Question

Quizplus · Accepted Answer

The profitability index is calculated by dividing the present value of future cash flows by the initial investment. If the result is greater than 1.00, it means that the present value of future cash flows is greater than the initial investment and the project has a positive net present value.

When the Profitability Index Is Greater Than 1