American_Bankers_Association
CTFA · Question #289
A profitability index of .85 for a project means that:
The correct answer is C. The project returns 85 cents in present value for each current dollar invested. See the full explanation below for the reasoning.
Investment Management
Question
A profitability index of .85 for a project means that:
Options
- AThe present value of benefits is 85% greater than the project's costs
- BThe project's NPV is greater than zero
- CThe project returns 85 cents in present value for each current dollar invested
- DThe payback period is less than one year
How the community answered
(49 responses)- A12% (6)
- B4% (2)
- C78% (38)
- D6% (3)
Topics
#profitability index#capital budgeting#NPV#project evaluation
Community Discussion
No community discussion yet for this question.