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

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

Multiple Choice QuestionA company needs to choose between two investment opportunities. Project 1 has a cost of $500,000 and expected NPV of cash flows of $450,000. Project 2 has a cost of $800,000 and expected NPV of cash flows of $750,000. Using profitability index as the evaluation method, the company should choose:Multiple choice question.either project. Both are acceptable because the difference between cost and NPV is $50,000 for bothProject 2 because it has a higher NPVProject 1 because it has a higher indexProject 2 because it has a higher index

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

A project has the following cash flows set out below. What is the profitability index of this project if the relevant discount rate is 5 percent? Enter your final answer to two decimal places. Year Cash flow 0 -1,483 1 542 2 2,075 3 3,665

Net investment is ______.Multiple choice question.the total amount of new investment purchasesthe wear and tear on investmentgross investment minus depreciationthe total amount of investment purchases, whether new or previously existing