Which of the following statements regarding the profitability index is true?

Question

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The profitability index is a measure of the present value of future cash flows relative to the initial investment. A profitability index greater than 1.0 indicates that the project is expected to generate a positive net present value and is therefore a good investment. When comparing projects, the one with the highest profitability index is preferred because it provides the best return on investment. A shorter payback period may be desirable, but it is not the primary consideration when using the profitability index for project evaluation.

Which of the Following Statements Regarding the Profitability Index Is