Asked by
Ehimy Garcia
on Nov 19, 2024
Verified
The profitability index and the internal rate of return:
A) will always result in the same preference ranking for investment projects.
B) will sometimes result in different preference rankings for investment projects.
C) are less dependable than the payback method in ranking investment projects.
D) are less dependable than net present value in ranking investment projects.
Profitability Index
A financial metric that measures the return on a project or investment relative to its cost, calculated by dividing the present value of future cash flows by the initial investment cost.
Internal Rate
Typically refers to the internal rate of return (IRR), which is a financial metric used to estimate the profitability of potential investments.
- Examine the variances between the Profitability Index, Internal Rate of Return (IRR), and Net Present Value (NPV) in the context of investment appraisal and their use in the prioritization of investment projects.
Verified Answer
VT
Learning Objectives
- Examine the variances between the Profitability Index, Internal Rate of Return (IRR), and Net Present Value (NPV) in the context of investment appraisal and their use in the prioritization of investment projects.