Using the profitability index, which of the following mutually exclusive projects should be accepted? Project A: NPV = $6,000; NINV = $50,000
Project B: NPV = $10,000; NINV = $120,000
Project C: NPV = $8,000; NINV = $80,000
A) A
B) B
C) C
D) All projects should be accepted

Question

Quizplus · Accepted Answer

The profitability index (PI) is calculated as (NPV + NINV) / NINV. For Project A, PI = 1.12; for Project B, PI = 1.083; for Project C, PI = 1.10. Project A has the highest PI and should be accepted.

Using the Profitability Index, Which of the Following Mutually Exclusive