If the internal rate of return on a project is 11.24%, and the project is assigned a 9.5% discount rate, then the profitability index will be greater than 1.0.

Question

Quizplus · Accepted Answer

The profitability index is calculated as the present value of future cash flows divided by the initial investment. If the internal rate of return (IRR) is higher than the discount rate, it means the present value of future cash flows is greater than the initial investment, resulting in a profitability index greater than 1.0.

If the Internal Rate of Return on a Project Is