Project profitability index greater than zero
A profitability index of .85 for a project means that: the present value of benefits is 85% greater than the project's costs. the project's NPV is greater than zero. the project returns 85 cents in present value for each current dollar invested. the payback period is less than one year. 2. If managers only invest in projects that have a profitability index greater than 1.0: The firm will increase in value. If a project with conventional cash flows has a profitablity index equal to 1.0, the project:-Will pay back during the life of the project A project with a payback period of four years is acceptable as long as. the company's target payback period is greater than or equal to four years. An acceptable project should have a net present value. greater than or equal to zero and a Profitability Index greater than or equal to one. If the project profitability index of an investment project is zero, then: A. the project's internal rate of return is less than the discount rate. B. the project's internal rate of return is greater than the discount rate. C. the project's internal rate of return is equal to the discount rate. profitability index: Ratio of the present value of a project's cash flows to the initial investment. A profitability index number greater than 1 indicates an acceptable project, and is consistent with a net present value greater than 0. Just as a clarification I am assumed the profitability index greater than one hence the above answer. Another look on the question make me feel a better assumption would be profitability index > 0 but less than one and hence the answer in that case would be A. the project is unattractive and shouldn't be pursued. If the index is greater than equal to unity, then the project adds value to the company or otherwise, it destroys value when the index is less than unity. Recommended Articles. This has been a guide to Profitability Index Formula.
24 Jul 2013 If the profitability index is any number greater than one, then that means the project's cash inflows are expected to exceed the project's cash
The equipment will be depreciated on a straight-line basis to a zero book value over the four-year life of the project. Projected net income for the four years is $16,900, $25,300, $27,700, and $18,400. A profitability index of .85 for a project means that: the present value of benefits is 85% greater than the project's costs. the project's NPV is greater than zero. the project returns 85 cents in present value for each current dollar invested. the payback period is less than one year. 2. If managers only invest in projects that have a profitability index greater than 1.0: The firm will increase in value. If a project with conventional cash flows has a profitablity index equal to 1.0, the project:-Will pay back during the life of the project A project with a payback period of four years is acceptable as long as. the company's target payback period is greater than or equal to four years. An acceptable project should have a net present value. greater than or equal to zero and a Profitability Index greater than or equal to one. If the project profitability index of an investment project is zero, then: A. the project's internal rate of return is less than the discount rate. B. the project's internal rate of return is greater than the discount rate. C. the project's internal rate of return is equal to the discount rate. profitability index: Ratio of the present value of a project's cash flows to the initial investment. A profitability index number greater than 1 indicates an acceptable project, and is consistent with a net present value greater than 0. Just as a clarification I am assumed the profitability index greater than one hence the above answer. Another look on the question make me feel a better assumption would be profitability index > 0 but less than one and hence the answer in that case would be A. the project is unattractive and shouldn't be pursued.
Accept a project if the profitability index is greater than 1, stay indifferent if the profitability index is 1 and don't accept a project if the profitability index is below 1. Profitability index is sometimes called benefit-cost ratio too and is useful in capital rationing since it helps in ranking projects based on their per dollar return
If the Profitability index is greater than one then the project is acceptable from profitability point of to zero and solving this equation for the rate of return (IRR). 23 Jan 2018 (C) Profitability Index. (D) Any of the above. 10-A project is accepted when. (A) Net present value is greater than zero. (B) Internal Rate of project's cash flows is equal to zero. Modified Internal Rate of Return (MIRR) and Profitability Index (PI); etc. Since NPV is greater than zero, the project is. However, if the riskiness of successive cash flows is greater, then the ratio of discount factors the rate of return such that the NPV of the project, using that rate as the discount rate, is zero. The profitability index is defined as PI = -PV/C 0.
Assuming that the cash flow calculated does not include the investment made in the project, a profitability index of 1 indicates break-even. Any value lower than
Question: Please Answer , If A Project's Profitability Index Is Equal To 1, Then (a)its Net Present Value Is Zero (b)its Net Present Value Is Positive (c)it Should Be Rejected (d)its Internal Rate Of Return Is Greater Than The Discount Rate. 2 .If A Project Has A Negative Present Valvue,its Profitability Index Will Be A.greater Than One B.less Than One C.one 6.A project profitability index greater than zero for a project indicates that A. the company should reevaluate its - Answered by a verified Business Tutor. We use cookies to give you the best possible experience on our website. 6.A project profitability index greater Generally speaking, a company would want to reject any project with a profitability index of less than one because investing in that project would be a money-losing venture. If the profitability index is any number greater than one, then that means the project’s cash inflows are expected to exceed the project’s cash outflows. Question 14 An independent project should be accepted if it O produces a profitability index greater than or equal to zero. has an IRR greater than zero produces are present value that is greater than the equivalent produces and present value that is greater than tro. A profitability index of .85 for a project means that: the present value of benefits is 85% greater than the project's costs. the project's NPV is greater than zero. the project returns 85 cents in present value for each current dollar invested. the payback period is less than one year. 2.
23 Oct 2016 When the profitability index is greater than 1, the project creates value -- it generates a return greater than our required return. When the
Just as a clarification I am assumed the profitability index greater than one hence the above answer. Another look on the question make me feel a better assumption would be profitability index > 0 but less than one and hence the answer in that case would be A. the project is unattractive and shouldn't be pursued. If the index is greater than equal to unity, then the project adds value to the company or otherwise, it destroys value when the index is less than unity. Recommended Articles. This has been a guide to Profitability Index Formula. Question: Please Answer , If A Project's Profitability Index Is Equal To 1, Then (a)its Net Present Value Is Zero (b)its Net Present Value Is Positive (c)it Should Be Rejected (d)its Internal Rate Of Return Is Greater Than The Discount Rate. 2 .If A Project Has A Negative Present Valvue,its Profitability Index Will Be A.greater Than One B.less Than One C.one 6.A project profitability index greater than zero for a project indicates that A. the company should reevaluate its - Answered by a verified Business Tutor. We use cookies to give you the best possible experience on our website. 6.A project profitability index greater
A project whose NPV equals zero ______. A)does not earn positive excess returns B)should be rejected C)has a profitability index that is greater than one D) has 23 Oct 2016 When the profitability index is greater than 1, the project creates value -- it generates a return greater than our required return. When the Assuming that the cash flow calculated does not include the investment made in the project, a profitability index of 1 indicates break-even. Any value lower than 30 Dec 2018 TLDR: Yes, Pick Both - Pick the one with the higher NPV, and then if you still have enough capital to invest, pick the next one. The Net Present initial cost of the project. Accept a project if the NPV is greater. than zero. Payback 2,900. a. Compute the profitability index for each of the two projects. b .