If the net present value is positive then the profitability index will be ___________?
Correct answer: D. greater than one
- A. greater than two
- B. equal to
- C. less than one
- D. greater than one
Explanation
Profitability index equals the present value of future inflows divided by the initial investment. A positive NPV means the inflows exceed the investment in present-value terms, so the index is greater than one.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? support@testustad.com
About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
Practise Business Finance
975 free Business Finance MCQs from Management Sciences, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Management Sciences questions like this
Management Sciences is on 2 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Business Finance questions
The cash flows occurring with more than one change in sign of cash flow are classified as __________?
The first step in calculation of net present value is to find out ________?
The situation in which one project is accepted while rejecting an other project in comparison is classified as __________?
The present value of future cash flows is divided by an initial cost of the project to calculate __________?
The initial cost is $5000 and the probability index is 3.2 then the present value of cash flows is _________?
The situation in which the firm limits the expenditures on capital is classified as __________?