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Which of the following statement regarding Profitability Index (PI) is correct? you should accept a project...

Which of the following statement regarding Profitability Index (PI) is correct? you should accept a project if PI is greater than 0 you should use PI to compare and select mutually exclusive projects you should accept a project if PI is greater than 1

Solutions

Expert Solution

Option a is incorrect since the profitability index of a project needs to be greater than 1 to accept the project.

Option b is incorrect since the net present value is the capital budgeting method that is used to select mutually exclusive projects.

Option c is correct a profitability index greater than 1 indicates that the project is profitable.

Hence, option c.

jeff jeffy answered 2 years ago
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