If a project costing $80,000 has a profitability index of 1.00 and the discount rate was 12%, then the present value of the net cash flows was
A) $80,000.
B) less than $80,000.
C) greater than $80,000.
D) undeterminable.

Question

Quizplus · Accepted Answer

A profitability index of 1.00 means that the present value of the net cash flows is equal to the initial investment of $80,000. Therefore, the present value of the net cash flows is $80,000.

If a Project Costing $80,000 Has a Profitability Index of 1.00