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When the net present value is positive, the present value index will be: a.negative. b.less than...

When the net present value is positive, the present value index will be: a.negative. b.less than one. c.greater than one. d.equal to zero.

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Answer #1

Answer - c) greater than one

PV index = PV of inflows/PV of outflows.

When NPV is postive, its means inflows are greater than outflows and if we have more inflows as per the formula, we will get the PVI greater than 1 For example -

We have PV of inflows of $10000 and PV of outflows $8000 and Now we get NPV $2000 which is positive

So, PV Index = $10000/$8000 = 1.25

PV Index = 1.25

Which means when the net present value is positive, , the present value index will be greater than one.

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