A Profitability Index (PI) of 0.9 means?
- The project's NPV is positive, and the project should be accepted
- The project's NPV is zero, and the project should be accepted
- The project's NPV is negative, and the project should be rejected
- None of these
Explanation
- A Profitability Index (PI) of 0.9 means the project's NPV is negative, and the project should be rejected.
- The Profitability Index (PI) compares the present value of future cash inflows with the initial investment.
- PI > 1: NPV is positive → Accept the project.
- PI = 1: NPV is zero → Indifferent between accepting and rejecting.
- PI < 1: NPV is negative → Reject the project.
Last verified on 12-08-2026
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