If an investment has a(n) ___________ of 1.2 it can be said that the investment generates $1.20 in present value benefits for each dollar of invested costs.
A) Profitability index.
B) Net present value.
C) Internal rate of return.
D) Payback period.
E) Average accounting return.

Question

Quizplus · Accepted Answer

The Profitability Index (PI) is a measure that calculates the ratio of the present value of future cash flows generated by a project to the initial investment made. A PI of 1.2 indicates that for every dollar invested, the project returns $1.20 in present value terms, making it a useful tool for comparing the efficiency of different investments.

If an Investment Has A(n) ___________ of 1