Final answer:
The profitability index (PI) and the net-present-value (NPV) approaches to capital budgeting can result in different rankings of multiple projects based on their calculations and criteria.
Step-by-step explanation:
The profitability index (PI) and the net-present-value (NPV) approaches can result in different rankings of multiple projects. The profitability index is calculated by dividing the present value of future cash flows by the initial investment. A project with a higher profitability index is considered more favorable. On the other hand, the net present value is calculated by subtracting the initial investment from the present value of future cash flows. A positive NPV indicates that the project is expected to generate more value than the initial investment.
So, while both approaches consider the time value of money and are used in capital budgeting decisions, they may yield different rankings of projects. This can happen when projects have different initial investments or cash flow patterns over time. It is important for decision-makers to carefully analyze and compare the results from both approaches to make informed investment decisions.