Final answer:
Yes, when calculating the project profitability index, the investment required includes investment in working capital at the beginning of the project, allowing for a thorough assessment of the project's potential return.
Step-by-step explanation:
When computing the project profitability index of an investment project, the initial investment required indeed includes any investment made in working capital at the beginning of the project.
The total initial investment encompasses all costs necessary to start the project, which allows for a comprehensive evaluation of the project's profitability. This would cover any expenditure on long-term assets as well as any increase in working capital needed to facilitate the operation of the project. The profitability index is a crucial tool for firms in determining which projects may provide the best rate of return on their invested capital, considering various possible sources of finance.