Without Using Formulas, Provide a Definition of Profitability Index (PI)

question 48

Multiple Choice

Without using formulas, provide a definition of profitability index (PI) .

• A) A ranking method used to assess projects. PI greater than 1 signify positive NPV projects, while PI less than 1 signify negative NPV projects.
• B) A project analysis tool that determines the amount of time required for an investment to generate cash flows to recover its initial cost.
• C) A project analysis tool that measures the acceptability of a project by determining the length of time required for an investment's discounted cash flows to equal its initial cost.
• D) A project analysis tool that measures the acceptability of a project through the difference between a project's initial investment and whether the present value of its cash flow will repay the investment.
• E) A project analysis tool that measures the acceptability of a project by determining the amount of profit that can be expected based on an investment made.

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Definitions:

Conditioned Responding

The behavior that results from learning through conditioning, where a neutral stimulus becomes associated with a meaningful stimulus, eliciting a response.

Green Light

A signal used in traffic lights indicating the permission to go or proceed.

Conditioned Responses

Learned reactions or responses to certain stimuli that occur as a result of conditioning, such as in classical and operant conditioning.

Garcia

A reference likely to John Garcia, known for his research on taste aversion learning showing that an organism can learn to avoid a substance after a negative experience.