If a project's internal rate of return is greater than the project's required return,then the project's profitability index will be greater than one.

Question

Quizplus · Accepted Answer

The profitability index is calculated by dividing the present value of cash inflows by the initial investment. If the internal rate of return is greater than the required return, it means that the project is generating returns higher than what is expected. This will result in a higher present value of cash inflows, which in turn will lead to a profitability index greater than one.

If a Project's Internal Rate of Return Is Greater Than