alleryStart learning →A project has a profitability index of exactly 1. What does this indicate?
ACertain loss of capital
BBreak-even position
CMaximum possible profit
DNegative NPV project
Answer & Solution
Correct answer: B. Break-even position
A PI of 1 means the present value of inflows equals the initial investment, so NPV is zero.
Keep practising Profitability Index
Browse all Profitability Index questions for CA Inter, or explore more Financial Management topics.
Related questions
Which rule applies to a PI result of 1.092 for an independent project?Perpetual inflow of Rs 12,000 a year at 10 percent against an outlay of Rs 1,00,000 gives Which of these is a technique that ignores the time value of money?A project has NPV zero at 18 percent discount rate. What is its IRR?If IRR exceeds the cost of capital on a conventional project, what is NPV?Which discount rate is often used when discounting project cash flows in NPV?Why is NPV on after-interest cash flows wrong?What is a limitation of the NPV approach regarding non-financial matters?