Question

An infrastructure company is evaluating a project requiring an initial investment of ₹1,000 Lakhs. The total Present Value (P

  • I and the corresponding Net Present Value (NP
  • V of expected future cash inflows discounted at the company's cost of capital (10%) is ₹1,250 Lakhs. Without doing complex calculations, what is the Profitability Index (P
  • V decision?
A PI = 0.80; Reject project because NPV = -₹250 Lakhs
B PI = 1.25; Accept project because NPV = +₹250 Lakhs
C PI = 1.25; Accept project because NPV = +₹250 Lakhs
D PI = 2.25; Accept project because NPV = +₹1250 Lakhs
E PI = 0.25; Accept project because NPV = +₹250 Lakhs
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