Question

You were recently hired by a firm as a project analyst. The owner of the firm is unfamiliar with financial analysis and wants to know only what the expected dollar return is per dollar spent on a given project. Which financial method of analysis will provide the information that the owner requests?
(A) Internal rate of return
(B) Modified internal rate of return
(C) Net present value
(D) Profitability index
(E) Payback

Answer 1

Answer: Profitability index is the financial method of analysis which will provide the information that the owner requests

This is an assessment technique inflicted to possible outlays. This splits the proposed capital flow by the planned capital outflow to find out the profitability of a project

Therefore the correct option is (d).