If a project has a profitability index greater than 1,
A) the npv will also be positive.
B) the irr will be higher than the required rate of return.
C) the present value of future cash flows will exceed the amount invested in the project.
D) all of the above.

Question

Quizplus · Accepted Answer

If the profitability index is greater than 1, the present value of future cash flows is expected to exceed the amount invested in the project. This indicates a positive net present value, and also implies that the project's internal rate of return (IRR) must be higher than the required rate of return in order to achieve this level of profitability. Therefore, all of the above options are correct.

If a Project Has a Profitability Index Greater Than 1