Ask Question
30 June, 08:25

The management of Dewitz Corporation is considering a project that would require an initial investment of $65,000. No other cash outflows would be required. The present value of the cash inflows would be $72,800. The profitability index of the project is closest to:A. 0.12B. 1.12C. 0.88D. 0.11

+5
Answers (1)
  1. 30 June, 12:15
    0
    It is 1.12 (B)

    Explanation:

    Profitability Index = PV of Future cash flow/Initial Investment

    = $72,800/$65,000

    =1.12

    The index is a useful tool for ranking investment projects and making decision most especially when there is limited capital availbal and all the viable projects cannot be executed. It showed the value created per unit of investment.

    Hence, the higher the profitability index, the more attractive the investment is.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “The management of Dewitz Corporation is considering a project that would require an initial investment of $65,000. No other cash outflows ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers