The following values have been computed for various independent projects which have a required payback period of 3 years, a required discount rate of 14.5 %, and a required accounting return of 11 %. Which one of these values indicates an accept decision?
A) Net present value of ($1,200).
B) Accounting rate of return of 10 %.
C) Profitability index of 1.02.
D) Internal rate of return of 13.6 %.
E) Payback period of 3.2 years.

Question

Quizplus · Accepted Answer

The profitability index of 1.02 indicates an accept decision because it is greater than 1, meaning the present value of future cash flows is greater than the initial investment, indicating a positive return on investment.

The Following Values Have Been Computed for Various Independent Projects