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
drow decision table of financee managment system

Q. Explain Traditional Method of Measurement? Computation of yield to measure a financial asset's return is the simplest and oldest technique of measurement. Yield can be find

Question 1: i) Is there a stable and inverse link between unemployment and inflation? ii) The government announces that expansionary policies will be enacted in a view

How to Industry analysis and finally stock picking from Buy-side perspective

Sega Inc. expects earnings/dividends to grow at an annual rate of 30 percent for the next 4 years. After that they feel that the market will get saturated and the growth rate will

ABC Ltd. Produces electronic components with a selling price per of Rs.100. Fixed cost amount to Rs.2,00,000/- 5000 units are produced and sold each year. Annua

Advantages to the Investors: The warrant acts as a sweetener and ensures a better subscription to the NCDs, especially for companies with good track record. NCDs with warran

Explain the implications of the deviations from the purchasing power parity for countries’ competitive positions in the world market. Answer:  If exchange rate changes satisfy pu

RWE Enterprises is a small manufacturer in Adelaide South Australia, feed suppliments for cattle. New production line NPV, Payback period and discounted payback period

a) Variable costs: Remuneration of flight attendants, Meals and drinks onboard, Fuel. Fixed costs: promotions and Advertising, Remuneration of administrative staff and Airport c