We Compute the Profitability Index of a Capital Budgeting Proposal

Multiple Choice

We compute the profitability index of a capital budgeting proposal by

A) multiplying the internal rate of return by the cost of capital.
B) dividing the present value of the annual after-tax cash flows by the cost of capital.
C) dividing the present value of the annual after-tax cash flows by the cash investment in the project.
D) multiplying the cash inflow by the internal rate of return.