alleryStart learning →The numerator of the profitability index formula is the present value of the project's:
ABorrowers
BBenefits
CBuildings
DBrochures
Answer & Solution
Correct answer: B. Benefits
1. The index is a ratio of two present values.
2. The numerator is the present value of the benefits of doing a project.
3. The denominator is the present value of the cost of doing the project.
4. So the top of the fraction holds the benefits.
_Source: OpenStax Principles of Finance (CC BY 4.0), Ch 16 'How Companies Think about Investing', sections 16.1-16.5_
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