The profitability index is closely related to:
A) Payback.
B) Discounted payback.
C) The average accounting return.
D) Net present value.
E) Mutually exclusive projects.

Question

Quizplus · Accepted Answer

The profitability index is closely related to Net Present Value (NPV) because both are based on the concept of discounted cash flows. The profitability index is essentially a ratio that compares the present value of future cash flows to the initial investment, which is a direct extension of the NPV calculation.

The Profitability Index Is Closely Related To