The profitability index allows comparison of the relative desirability of projects that require differing initial investments.

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The profitability index is a ratio of the present value of a project's future cash flows to the initial investment. By using the profitability index, it is possible to compare projects with differing initial investments and determine which project provides the greatest value based on the amount invested.

The Profitability Index Allows Comparison of the Relative Desirability of Projects