Profitability index (pi), Financial Management

Profitability Index (PI) :

It is a ratio of the present value of the total cash benefits to the present value of the net cash outlay.  The higher the PI, the higher the return. Any project with a PI higher than ONE is acceptable since profits exceed outlay. Projects with PI less than ONE are rejected.

Advantages:

  • It places the present value of every investment project on a relative basis so that projects of dissimilar sizes of capital outlays can be compared.
Posted Date: 10/15/2012 9:25:41 AM | Location : United States







Related Discussions:- Profitability index (pi), Assignment Help, Ask Question on Profitability index (pi), Get Answer, Expert's Help, Profitability index (pi) Discussions

Write discussion on Profitability index (pi)
Your posts are moderated
Related Questions
Weaver Chocolate Co. expects to gain $3.50 per share during the present year, its expected dividend payout ratio is 65%, its expected constant dividend growth rate is 6.0%, and its

Extendible reset bonds are floaters in which the issuer is required to reset the coupon rate so that the issue will trade at a predetermined price (usually above

how would you judge the potential

Explain the operating cycle of a vegetable growing business

What is Inventory turnover The shortcoming of this ratio is that average calculation based on beginning and year-end inventory may not represent actual average in year. Other l

Working capital cycle for a trade Inventories days (time inventories are held before being sold)   Plus   Trade receivables days (how long

what is the rand corporation five project rank

A brief scenario for each of two different organisations is presented. You are advised to read both scenarios before answering the questions that follow. Use the scenario details t

What do you understand by financial viability of the organization? 2 : Define Following accounting and financial terms: Asset Liability Equity Income Expense

Question 1 ) A Globalization is a procedure of international integration that arises due to increasing human connectivity as well as the interchange of products, ideas and other ph