medium · Principles of Finance capital-budgeting
A firm with a 10% cost of capital is considering a $50M project with an Internal Rate of Return (IRR) of 12%.
If the project's NPV is positive, what can we conclude about the project's 'Profitability Index' (PI)?
- The PI is exactly equal to 1.12.
- The PI must be less than 1.0.
- The PI cannot be determined without knowing the project's duration.
- The PI must be greater than 1.0.
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