If a project costing 70000 has a profitability index of 1 an

If a project costing $70000 has a profitability index of 1 and the discount rate was 12%, then the present value of the net cash flows was

Solution

Profitability Index= PV of net cash flows÷Initial Investment

In the given case if PI is 1 and initial investment is 70000 then by putting values in above equation we get

1 = PV of net cash flows÷70000

PV of net cash flows =$ 70000

Hence, option b is correct.