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What are some non-financial reasons for undertaking a project that has a Profitability Index of less...

What are some non-financial reasons for undertaking a project that has a Profitability Index of less than 1?

Also, what are some non-financial reasons for not undertaking a project that has a Profitability Index of greater than 1?

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Answer #1

However, the points are very subjective and vary from situation to situation. Still:-

Some non-financial reasons for undertaking a project that has a Profitability Index of less than 1 are:-

- The project would have great positive impact on brand image of Company.

- The project would have negative impact on culture of Company.

- The project could increase the cash flows in other project. For example, if we sell soft drinks with snacks at loss, it might look unattarctive, but it will increase sales of snacks also.

Some non-financial reasons for not undertaking a project that has a Profitability Index of greater than 1 are:-  

- The project would have great negative impact on brand image of Company.

- The project would have negative impact on culture of Company.

- The project could decrease the cash flows in other project.

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