The correct answer is B. 1.82.
Profitability index (PI) is a project selection tool that compares the present value of the project’s future cash flows to the initial cost of the project. It is calculated as follows:
PI = Present value of future cash flows / Initial cost
In this case, the present value of future cash flows is Rs 2000 and the initial cost is Rs 1100. Therefore, the profitability index is:
PI = 2000 / 1100 = 1.82
A profitability index of 1.82 indicates that the project is expected to generate a return of 82% on the initial investment. This is a good return and the project should be accepted.
Option A is incorrect because it is the percentage return on the initial investment. Option C is incorrect because it is the reciprocal of the profitability index. Option D is incorrect because it is the percentage return on the present value of future cash flows.