General Studies · Investment Appraisal Techniques
If a capital budgeting project's Profitability Index (PI) is calculated to be 0.95, what does this imply about the project's Net Present Value (NPV) and the resulting investment decision?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The NPV is unrelated to the calculated Profitability Index
- 2The NPV is negative, indicating that the project should be rejected✓
- 3The NPV is exactly zero, making the decision indifferent to the firm
- 4The NPV is positive, indicating that the project should be accepted
Correct answer
The NPV is negative, indicating that the project should be rejected
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