Profitability index (PI) rule is to take an investment, if the index exceeds___________?
Correct answer: C. 1
- A. -1
- B. 0
- C. 1
- D. 2Compare Credit Cards
Explanation
An investment is acceptable under the profitability index rule when PI exceeds 1, meaning the present value of future cash inflows is greater than the initial investment. A PI below 1 indicates value destruction.
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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.
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