If a capital budgeting project has an NPV greater than zero, what does its Profitability Index (PI) equal?

Explanation

Core Concept: Profitability Index (PI) is calculated as PV of Cash Inflows divided by Initial Investment Outlay. If NPV > 0, the PV of inflows exceeds the initial investment, making PI > 1. Context/Distractors: If NPV = 0, PI = 1; if NPV < 0, PI < 1. Exam Tip/Key Fact: PI is especially useful under capital rationing when selecting among independent projects.