Choice "B" is correct. The profitability index is a variation of the net present value capital budgeting model. RULE: The profitability index is the ratio of the present value of net future cash inflows to the present value of the net initial investment. The profitability index is also referred to as the "excess present value index" or simply the "present value index." Companies hope that this ratio will be over 1.0, which means that the present value of the inflows is greater than the present value of the outflows.

Choice "d" is incorrect. The profitability index is a companion computation to net present value, not internal rate of return, which measures percentage return.
Choice "c" is incorrect. The profitability index is a companion computation to net present value, not economic value added.
Choice "a" is incorrect. The profitability index is a companion computation to net present value, not the discounted payback method, which measures years to payback.