when several alternative investment proposal of the same amount are being consid
ID: 2499857 • Letter: W
Question
when several alternative investment proposal of the same amount are being considerd the one with the largest net prestent value is the most desirable. if the alternative proposals involve different amount of investment it is prepare a relative ranking of the proposals by using a My Online te: × C sjccengagenow.com/ilm/takeAssignment/takeAssignmentMain.deo est: Ch 26-5 Test ime Remaining: 051:36 Email Instructor Questions b Multiple Choice 26 022 ave Submit Test for Grading Qostion 10 of to When several alternative investment proposals of the sase amount are being cossidered, the one xith the largest net preseat different amounts of investment, it is useful to prepare a relative raaking of the proposals by using afn): value is the most desirable. If the alternative proposals invobe O a. consumer price index. O b. price-level index e c. average rate of return. d. present value index. b Multiple Choice 26 2Explanation / Answer
A profitability index attempts to identify the relationship between the costs and benefits of a proposed project. The profitability index is calculated by dividing the present value of the project's future cash flows by the initial investment. A PI greater than 1.0 indicates that profitability is positive, while a PI of less than 1.0 indicates that the project will lose money. As values on the profitability index increase, so does the financial attractiveness of the proposed project.
The PI ratio is calculated as follows:
PV of Future Cash Flows
Initial Investment
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.