The Profitability Index of an Investment Project Is the Ratio

question 10

Multiple Choice

The profitability index of an investment project is the ratio of the:

• A)average net income from the project to the average investment cost.
• B)internal rate of return to the current market rate of interest.
• C)net present value of the project's cash outflows divided by the net present value of its inflows.
• D)net present value of every cash flow related to the project compared to the initial cost.
• E)present value of the cash flows subsequent to the initial cost compared to the initial cost.

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Definitions:

Property Taxes

Levies imposed by local governments on real estate properties, calculated based on the property's value.

Compounded Annually

Interest calculated once per year on the initial principal, including all interest from previous periods.

Compounded Monthly

An interest calculation method where interest is added to the principal balance on a monthly basis, with each month's interest calculation based on the principal plus all previously compounded interest.

Insurance Premium

The amount of money an individual or business must pay for an insurance policy.