Which among the following statements is/are TRUE w.r.t. profitability index?I. Profitability index helps in ranking investments and deciding the best investment that should be made.II. If PI is less than 1, accept the investment. If PI is greater than 1, reject the investment and if PI = 1, then indifferent (may accept or reject the decision)III. It uses the time value concept of moneya)Only Ib)Only IIc)I andamp; III Onlyd)All I, II andamp; IIICorrect answer is option 'C'. Can you explain this answer?

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Which among the following statements is/are TRUE w.r.t. profitability index?
I. Profitability index helps in ranking investments and deciding the best investment that should be made.
II. If PI is less than 1, accept the investment. If PI is greater than 1, reject the investment and if PI = 1, then indifferent (may accept or reject the decision)
III. It uses the time value concept of money

a)
Only I
b)
Only II
c)
I & III Only
d)
All I, II & III

Correct answer is option 'C'. Can you explain this answer?

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Which among the following statements is/are TRUE w.r.t. profitability ...

Profitability index is a financial tool which tells us whether an investment should be accepted or rejected. It uses the time value concept of money and is calculated by the following formula.

The accept-reject decision is made as follows:

If PI is greater than 1, accept the investment. If PI is less than 1, reject the investment and if PI = 1, then indifferent (may accept or reject the decision)
Profitability index helps in ranking investments and deciding the best investment that should be made. PI greater than one indicates that present value of future cash inflows from the investment is more than the initial investment, thereby indicating that it will earn profits.

Answered by Notes Wala · View profile

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Which among the following statements is/are TRUE w.r.t. profitability index?I. Profitability index helps in ranking investments and deciding the best investment that should be made.II. If PI is less than 1, accept the investment. If PI is greater than 1, reject the investment and if PI = 1, then indifferent (may accept or reject the decision)III. It uses the time value concept of moneya)Only Ib)Only IIc)I & III Onlyd)All I, II & IIICorrect answer is option 'C'. Can you explain this answer?

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