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AHIP Exam AHM-520 Topic 2 Question 88 Discussion

Actual exam question for AHIP's AHM-520 exam
Question #: 88
Topic #: 2
[All AHM-520 Questions]

The Jade Health Plan used a profitability index (PI) to rank the following capital proposals:

Proposal PI

A 0.45

B 1.05

This information indicates that, of these two projects, Jade would most likely select:

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Suggested Answer: C

by Zana at May 20, 2024, 09:49 AM

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Sherita
5 months ago
Alright, time to put my finance skills to the test. A PI of 0.45 means the NPV is negative, so the answer is A. Easy peasy, lemon squeezy!
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Kristel
5 months ago
Exactly, it's all about understanding the profitability index and net present value.
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Haydee
5 months ago
That makes sense, Proposal A would be selected if the NPV is less than zero.
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Hana
5 months ago
I think the answer is A, since a PI of 0.45 means the NPV is negative.
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Hailey
5 months ago
Haha, this is a trick question! The PI is just a ranking tool, not an indicator of NPV. The correct answer is D, Proposal B, because the PI for that project is greater than 1, meaning the NPV is positive.
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Brandee
5 months ago
That's right! Proposal B would most likely be selected because its PI is greater than 1, indicating a positive NPV.
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Ruby
5 months ago
Exactly! Proposal B would most likely be selected because of its higher PI.
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Celia
5 months ago
I see what you mean, the PI is just a ranking tool, not a direct indicator of NPV.
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Yolande
5 months ago
Oh, I see! So the PI doesn't directly indicate the NPV, it's just for ranking.
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Gertude
5 months ago
That makes sense, Proposal B would be selected because its PI is greater than 1.
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Earnestine
5 months ago
I think the answer is D, Proposal B, because the PI is greater than 1.
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Skye
5 months ago
I see what you mean, the PI is just a ranking tool, not an indicator of NPV.
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Wilbert
6 months ago
Hmm, I think I'll go with D. Why? Because the higher the PI, the better the project. And 1.05 is definitely higher than 0.45, so Proposal B must be the winner!
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Edison
5 months ago
Yes, Proposal B is the way to go since it has a higher PI, indicating a greater net present value.
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Jackie
5 months ago
I agree with you, Proposal B seems like the better choice with a PI of 1.05.
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Shawn
6 months ago
A profitability index of 0.45 means the NPV is less than zero, so the answer is clearly A. This is a straightforward capital budgeting question.
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Yesenia
5 months ago
That makes sense, Proposal A is the most likely choice with a PI of 0.45.
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Na
6 months ago
A) Proposal A, and the PI indicates that the net present value (NPV) for this project is less than zero
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