When the Profitability Index Is Less Than 1

question 44

True/False

When the profitability index is less than 1.00 for a project, that project has a positive net present value.

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Definitions:

Allocation Efficient

A distribution of resources in which it is impossible to make any one individual better off without making at least one individual worse off.

Mutually Beneficial

A situation or agreement that provides advantages to all parties involved, ensuring that each gains from the interaction.

Transaction Costs

Expenses incurred when buying or selling a good or service, which can include fees, taxes, and other charges beyond the price of the product itself.

Complete Information

A state in which all participants in an economic transaction have full knowledge of the terms, conditions, and outcomes associated with the transaction.