Profitability index (PI) is calculated as:a.(Net present value) / (Initial investment)b.(Accounting rate of return) / (Discount rate)c.(Discounted payback period) / (Net present value)d.(Payback period) / (Accounting rate of return)Clear my choice

Multiple Choice QuestionThe formula to calculate the profitability index is:Multiple choice question.net present value of Investment 1/net present value of Investment 2total net cash flows/initial investmentnet present value of cash flows/initial investmentpresent value of net cash flows/initial investment

The discounted payback period is a capital budgeting criterion that accounts for:a.The time value of moneyb.The accounting rate of return (ARR)c.The payback periodd.The profitability index (PI)Clear my choice

Multiple Choice QuestionIt is appropriate to use the profitability index to evaluate investment decisions when:Multiple choice question.some projects result in negative net present valuesdifferent discount rates are usedthe amounts invested differ substantially

Profitability Ratios)

Based upon the following data: calculate the Profitability Index. Cost = $325Present value of future cash flows = $350