In case of divisible projects, which of the following can be used to maximise NPV?

Feasibility Set Approach

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Internal Rate of Return

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Profitability Index Approach

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Any of the above

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Solution

The correct option is B Profitability Index Approach
Profitability Index is one of the methods used in capital budgeting for project valuation. It is used to attain maximum NPV in case of divisible projects as the ratio shows how much profit results from a project in comparison to the initial cost invested.

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