Final answer:
The profitability index is a ratio that measures the present value of future cash flows to the initial investment. By only investing in projects with a profitability index greater than one, financial managers can maximize firm value, shareholder wealth, and share price.
Step-by-step explanation:
The correct answer is E) I, II, and III. The profitability index is a ratio that measures the present value of future cash flows to the initial investment. A profitability index greater than one indicates that the project's present value of cash flows exceeds the initial investment, resulting in a positive net present value. By only investing in projects with a profitability index greater than one, financial managers can ensure that the value of the firm (I), the wealth of the shareholders (II), and the share price (III) are all maximized. This is because investing in projects with positive net present value increases the overall profitability and success of the firm.