The profitability index is always less than 1.0.

Question

Quizplus · Accepted Answer

The profitability index is calculated by dividing the present value of future cash flows by the initial investment. If the result is greater than 1.0, it indicates that the project is profitable. If it is less than 1.0, it means the project will not generate enough cash flows to earn back its initial investment. Therefore, the profitability index can be greater than or equal to 1.0, depending on the project's expected cash flows.

The Profitability Index Is Always Less Than 1.0