Q482
If net present value is positive then profitability index will be
A.
greater than two
B.
equal to
C.
less than one
D.
greater than one
AnswerAnswer: Option D
Solution
Answer: Option D
Solution:
If net present value is positive then profitability index will be greater than one. A positive net present value indicates that the projected earnings generated by a project or investment - in present dollars - exceeds the anticipated costs, also in present dollars. It is assumed that an investment with a positive NPV will be profitable, and an investment with a negative NPV will result in a net loss.