If financial managers only invest in projects that have a profitability index greater than one, then share price will be maximized.

Question

Quizplus · Accepted Answer

A profitability index greater than one indicates that the present value of future cash flows from a project exceeds the initial investment, suggesting that the project is expected to generate more value than it costs. By investing in such projects, financial managers can increase the firm's net present value, potentially leading to an increase in the firm's share price as the market recognizes the added value from these investments.

If Financial Managers Only Invest in Projects That Have a Profitability