#5

Suppose you calculate the Profitability Index (PI) for a project, given the project cash flows and a required rate of return of 12%. After you calculate the PI, you discover that the actual required rate of return is 14%. The new PI you calculate using a required rate of return of 14% would be

		a. lower than the PI calculated with a required rate of return of 12%.
		b. higher than the PI calculated with a required rate of return of 12%.
		c. the same as the PI calculated with a required rate of return of 12%.
		d. uncertain because it could be either lower or higher than the PI calculated with a required rate of return of 12%.