If a project generates a net present value of zero,the profitability index for the project will
A)equal zero.
B)equal 1.
C)equal -1.
D)be undefineD.

Question

Quizplus · Accepted Answer

The profitability index (PI) is equal to the present value of the project's future cash inflows divided by the initial investment. If the net present value (NPV) is zero, it means that the present value of the cash inflows equals the initial investment. Therefore, the PI will be equal to 1, indicating that for every dollar invested, the project will generate a dollar of cash inflows.

If a Project Generates a Net Present Value of Zero,the