We Compute the Profitability Index of a Capital-Budgeting Proposal by

question 37

Multiple Choice

We compute the profitability index of a capital-budgeting proposal by

• A) multiplying the IRR by the cost of capital.
• B) dividing the present value of the annual after-tax cash flows by the cost of capital.
• C) dividing the present value of the annual after-tax cash flows by the cost of the project.
• D) multiplying the cash inflow by the IRR.

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Definitions:

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