The Carter project has a net present value of $6,000. Its only cash outflow is its cost of $8,000. The profitability index is
A)1.75
B)1.33.
C)2.33
D)0.75.

Question

Quizplus · Accepted Answer

The profitability index is calculated by dividing the present value of the project's cash inflows by the initial investment. In this case, the present value of the cash inflows is $6,000 and the initial investment is $8,000, so the profitability index is $6,000/$8,000 = 1.75.

The Carter Project Has a Net Present Value of $6,000