Based on the proﬁtability index (PI) rule, should a project with the following cash ﬂows be accepted if the discount rate is 8 percent? Why or why not?
A) Yes; because the PI is .98
B) Yes; because the PI is 1.03
C) No; because the PI is .95
D) No; because the PI is .98
E) No; because the PI is 1.03

Question

Based on the proﬁtability index (PI) rule, should a project with the following cash ﬂows be accepted if the discount rate is 8 percent? Why or why not? 
A) Yes; because the PI is .98 
B) Yes; because the PI is 1.03 
C) No; because the PI is .95 
D) No; because the PI is .98 
E) No; because the PI is 1.03

Quizplus · Accepted Answer

The profitability index (PI) rule states that a project should be accepted if the PI is greater than 1.0. In this case, the project has a PI of 1.03, which is greater than 1.0, indicating that the project should be accepted. Therefore, choice B is the best choice.

Based on the Proﬁtability Index (PI) Rule, Should a Project