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    Question

    Profitability Index less than 1

    indicates:
    A Project should be accepted Correct Answer Incorrect Answer
    B Project should be rejected Correct Answer Incorrect Answer
    C Project is indifferent Correct Answer Incorrect Answer
    D Cannot say Correct Answer Incorrect Answer

    Solution

    PI = PV of Inflows/Initial Investment. PI < 1 means PV of inflows < Investment, so NPV negative → reject.

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