{"id":59017,"date":"2024-04-16T01:29:42","date_gmt":"2024-04-16T01:29:42","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=59017"},"modified":"2024-04-16T01:29:42","modified_gmt":"2024-04-16T01:29:42","slug":"profitability-index-in-capital-budgeting-is-used-for","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/profitability-index-in-capital-budgeting-is-used-for\/","title":{"rendered":"Profitability index in capital budgeting is used for"},"content":{"rendered":"

[amp_mcq option1=”negative projects” option2=”relative projects” option3=”evaluate projects” option4=”earned projects” correct=”option3″]<\/p>\n

The correct answer is: C. evaluate projects.<\/p>\n

Profitability index (PI) is a capital budgeting tool that is used to evaluate the profitability of a project. It is calculated by dividing the project’s net present value (NPV) by its initial investment. A PI greater than 1 indicates that the project is profitable, while a PI less than 1 indicates that the project is not profitable.<\/p>\n

Negative projects are projects that have a negative NPV. These projects should not be pursued, as they will result in a loss of money.<\/p>\n

Relative projects are projects that are being compared to each other. The PI can be used to compare the profitability of different projects. The project with the highest PI is the most profitable project.<\/p>\n

Earned projects are projects that have already been completed. The PI cannot be used to evaluate these projects, as the NPV is not known.<\/p>\n

In conclusion, the profitability index is a capital budgeting tool that is used to evaluate the profitability of a project. It is calculated by dividing the project’s NPV by its initial investment. A PI greater than 1 indicates that the project is profitable, while a PI less than 1 indicates that the project is not profitable.<\/p>\n","protected":false},"excerpt":{"rendered":"

[amp_mcq option1=”negative projects” option2=”relative projects” option3=”evaluate projects” option4=”earned projects” correct=”option3″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"class_list":["post-59017","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"\nProfitability index in capital budgeting is used for<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/profitability-index-in-capital-budgeting-is-used-for\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Profitability index in capital budgeting 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