We compute the profitability index of a capital-budgeting proposal by: - 3964

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We compute the profitability index of a capital-budgeting proposal by: 

A.

 

multiplying the IRR by the cost of capital.

B.

 

dividing the present value of the annual after-tax cash flows by the cost of capital.

C.

 

multiplying the cash inflow by the IRR.

D.

 

dividing the present value of the annual after-tax cash flows by the cost of the project.

 
Solution Description

We compute the profitability index of a capital-budgeting proposal by: