A project requires an investment of $2,500 and has a net present value of $430. If the internal rate of return is 10%, what is the profitability index for the project?

Question

Quizplus · Accepted Answer

The profitability index is calculated as the ratio of the present value of future cash flows (which includes the net present value plus the initial investment) to the initial investment. Here, it's (430 + 2500) / 2500 = 2930 / 2500 = 1.172, which rounds to 1.17.

A Project Requires an Investment of $2,500 and Has a Net