A. If projects are mutually exclusive or are of differing time periods and initial investment amounts, the PI method may result in a different ranking from that of the NPV method.

B. The PI does not fail to consider the timing of project cash flows. On the contrary, it uses the present value of the cash inflows discounted using the firm's required rate of return. Therefore, the timing of the cash flows is included.

C. The Profitability Index (PI) is a benefit/cost ratio. It is the present value of the future net cash inflows divided by the initial net cash investment. A ratio of greater than 1 indicates an acceptable project. Therefore, whenever projects are independent (i.e., not mutually exclusive), the PI will yield the same accept/reject decision as the NPV method, because a positive NPV will result in a PI of greater than 1. The PI method is useful for ranking multiple investment opportunities that are of different investment amounts if the projects are not mutually exclusive.

D. The calculation of PI is based upon cash flow, not net income.