If a company's required rate of return is 9%, and in using the profitability index method, a project's index is greater than 1, this indicates that the project's rate of return is
A) equal to 9%.
B) greater than 9%.
C) less than 9%.
D) unacceptable for investment purposes.

Question

Quizplus · Accepted Answer

A profitability index greater than 1 indicates that the project's present value of cash inflows is greater than its initial investment. This means that the project's rate of return is higher than the company's required rate of return of 9%, making it a viable investment option.

If a Company's Required Rate of Return Is 9%, and in Using